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.

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.