Nat-Gas Prices Move Higher on Cooler Forecasts and Restored LNG Shipments

December Nymex natural gas (NGZ26) on Wednesday closed up +0.028 (+0.93%). 

Dec nat-gas prices on Wednesday closed higher on increased LNG flows to Gulf export terminals, which reduced domestic gas inventories.  LNG flows to the Freeport LNG terminal in particular have recovered to normal levels after a near shutdown on Monday.

Even after the upward rebound on Tuesday and Wednesday from Monday’s 6-month nearest-futures low, Dec nat-gas prices are down a net -16% since October 13 on forecasts for above-average US autumn temperatures that could curb nat-gas heating demand. 

Still, nat-gas prices rebounded higher on Tuesday and Wednesday as forecasts turned a bit cooler.  Commodity Weather Group said Wednesday that forecasts shifted cooler, but above-average temperatures are still expected across the eastern US through November 6.

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 Wednesday was 113.7 bcf/day (+6.0% y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 72.8 bcf/day (-7.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals Wednesday were 20.9 bcf/day (+2.9% 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.

Last Thursday's weekly EIA report was slightly bullish for nat-gas prices, showing a +77 bcf increase in US nat-gas inventories for the week ended October 16, below expectations of +78 and below the 5-year weekly average of +87 bcf.  As of October 16, nat-gas inventories were down -4.3% 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 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.