Forecasts for Cooler US Weather Lift Nat-Gas Prices

November Nymex natural gas (NGX26) on Friday closed up +0.036 (+1.09%).

Nat-gas prices recovered from early losses on Friday and settled sharply higher as forecasts for cooler US weather later this month could boost heating demand for nat-gas.  The Commodity Weather Group on Friday said forecasts shifted cooler across the northern and western US from October 12-15.

US (lower-48) dry gas production on Friday was 111.9 bcf/day (+2.7% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 74.3 bcf/day (+8.9% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 18.3 bcf/day (-3.5% w/w), according to BNEF.

A bearish medium-term factor for nat-gas prices is the market's expectation that a “Super El Niño” will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing heating demand for nat-gas. 

As a negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended September 26 fell -0.85% y/y to 83,811 GWh (gigawatt hours).  However, US electricity output in the 52 weeks ending September 26 rose +3.27% y/y to 4,411,446 GWh.

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.  Last Monday, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.

Thursday's weekly EIA report was slightly bearish for nat-gas prices, showing a +64 bcf increase in US nat-gas inventories for the week ended September 25, above expectations of +63 but below the 5-year weekly average of +80 bcf.  As of September 25, nat-gas inventories were down -4.1% y/y and +2.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of September 29, gas storage in Europe was 72% full, compared to the 5-year seasonal average of 87% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ended October 2 fell by 2 to 133 rigs, down from a 3-year high of 135 rigs on September 25.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions 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.