Nat-Gas Prices Partially Recover from Monday’s 6-Month Low

November Nymex natural gas (NGX26) on Tuesday closed up +0.095 (+3.65%).

Nov nat-gas prices on Tuesday rebounded higher from Monday’s 6-month nearest futures low.  Even after Tuesday’s rebound, Nov nat-gas prices are down a net -18% since October 13 on forecasts for above-average US autumn temperatures that could curb nat-gas heating demand. 

Nat-gas prices rebounded higher on Tuesday as forecasts turned a bit cooler and gas flows to the Freeport LNG terminal recovered to near-normal levels on Tuesday after a near shutdown on Monday.  Higher LNG flows mean lower gas inventories for domestic consumption. 

Commodity Weather Group said Tuesday that forecasts shifted cooler, but above-average temperatures are still expected across the eastern US during November 1-10.

A bearish longer-term factor for nat-gas prices is the market's expectation that the Super El Niño will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing heating demand for nat-gas.  The Commodity Weather Group is forecasting that US temperatures in both October and November will be the third-warmest in records going back to 1950.

US (lower-48) dry gas production Tuesday was 113.5 bcf/day (+4.9% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 73.8 bcf/day (-4.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals Tuesday were 20.8 bcf/day (+7.3% w/w), according to BNEF.

As a bearish factor, the US Energy Information Administration (EIA) on August 11 projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average.  On September 21, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.

As a positive factor for gas prices, the Edison Electric Institute reported last Thursday that US (lower-48) electricity output in the week ended October 17 rose +7.8% y/y to 79,496 GWh (gigawatt-hours).  Also, US electricity output in the 52 weeks ending October 17 rose +3.3% y/y to 4,421,919 GWh.

Last Thursday's weekly EIA report was slightly bullish for nat-gas prices, showing a +77 bcf increase in US nat-gas inventories for the week ended October 16, below expectations of +78 and below the 5-year weekly average of +87 bcf.  As of October 16, nat-gas inventories were down -4.3% y/y and +1.0% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of October 24, gas storage in Europe was 75% full, compared to the 5-year seasonal average of 90% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended October 23 fell by -1 to 132 rigs, just below the 3-year high of 135 rigs on September 25.