Nat-Gas Prices Fall on EIA Inventory Rise and Warm Weather

December Nymex natural gas (NGZ26) closed down -0.080 (-2.64%) on Thursday.

Dec nat-gas prices closed lower Thursday on a larger-than-expected rise in weekly EIA inventories (+80 bcf vs. a consensus +72 bcf) and continued warm-weather forecasts. The Commodity Weather Group is forecasting above-average temperatures across the eastern half of the US through November 7.

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 Thursday was 113.9 bcf/day (+5.5% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 73.3 bcf/day (-9.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals Thursday were 21.0 bcf/day (+1.0% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported Thursday that US (lower-48) electricity output in the week ended October 24 rose +1.0% y/y to 73,484 GWh (gigawatt-hours).  Also, US electricity output in the 52 weeks ending October 24 rose +3.3% y/y to 4,422,630 GWh.

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 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.

On the date of publication, Rich Asplund did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.