Nat-Gas Prices Jump as US Temps Cool and LNG Exports Soar

December Nymex natural gas (NGZ26) closed up +0.220 (+7.34%) on Monday.

Dec nat-gas prices rallied to a 4-week high on Monday and settled sharply higher as the prospects of colder US temperatures that could boost heating demand for nat-gas sparked fund short covering in nat-gas futures.  The Commodity Weather Group said Monday that forecasts shifted cooler across the central and eastern US through November 20.

Ramped-up US nat-gas exports that shrink domestic stockpiles also supported prices on Monday after LNG net flows to US LNG export terminals rose to a record 21.6 bcf/day on Saturday, according to BNEF.

Excessively short fund positions in NY nat-gas futures could add fuel to any short-covering rally.  Last Friday’s weekly Commitment of Traders (COT) report showed funds boosted their short NY nat-gas positions by 11,426 in the week ended November 3 to a record net-short position of 636,576 (data from 2013).

Nat-gas prices sank to a 6.5-month nearest-futures low (X26) late last month 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 Monday was 113.0 bcf/day (+1.4% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 79.1 bcf/day (-5.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals Monday were 21.5 bcf/day (+4.8% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported last 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 +77 bcf in the week ended October 30, above the 5-year average of +61 bcf.  As of October 30, nat-gas inventories were down -2.9% y/y and +1.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of November 7, gas storage in Europe was 73% full, compared to the 5-year seasonal average of 89% 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 November 6 rose by +1 to 131 rigs, just below the 3-year high of 135 rigs posted on September 25.