Cooler US Weather Forecasts Lift Nat-Gas Prices

December Nymex natural gas (NGZ26) closed up +0.064 (+2.21%) on Wednesday.

Dec nat-gas prices settled higher on Wednesday as forecasts for cooler US autumn temperatures could potentially boost heating demand for nat-gas.  The Commodity Weather Group said Wednesday that forecasts shifted cooler across the eastern half of the US through November 8 and across the Midwest and West from November 9-13.

Gains in nat-gas prices were limited on Wednesday in anticipation of a larger-than-seasonal build in US nat-gas storage.  Thursday’s weekly EIA nat-gas inventories are expected to climb by +81 bcf in the week ended October 30, well above the five-year average of +61 bcf for the week.

Last Monday, nat-gas prices sank to a 6.25-month nearest-futures low (X26) as warm US autumn weather has curbed heating demand for nat-gas and allowed US storage levels to climb. Also, expectations that the “Super El Niño” will bring warmer-than-normal temperatures to the Northern Hemisphere this winter and reduce nat-gas heating demand are weighing on prices. 

US (lower-48) dry gas production on Wednesday was 112.0 bcf/day (+1.3% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 73.0 bcf/day (-2.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals Wednesday were 19.7 bcf/day (-1.7% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended October 31 rose +1.0% y/y to 74,445 GWh (gigawatt-hours).  Also, US electricity output in the 52 weeks ending October 31 rose +3.3% y/y to 4,423,346 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices, showing an increase of +80 bcf in the week ended October 23, above the +72 bcf consensus and the +77 bcf 5-year average.  As of October 23, nat-gas inventories were down -4.1% y/y and +1.0% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of November 2, gas storage in Europe was 74% 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 -2 to 130 rigs, just below the 3-year high of 135 rigs posted on September 25.