Natural Gas Prices Slip as Demand Wavers Amid Power Outages

November Nymex natural gas (NGX24) on Friday closed down by -0.043 (-1.61%).

Market Reactions Driven by Weather Forecasts

On Friday, natural gas prices initially rose due to forecasts predicting colder temperatures in the eastern U.S., which typically boosts heating demand. However, concerns about fuel demand ultimately led to a moderate drop in prices. Approximately 2.25 million people in Florida lost electricity after Hurricane Milton, diminishing the need for natural gas from electricity suppliers.

Production and Demand Statistics

According to BNEF, natural gas production in the lower 48 states was reported at 101 billion cubic feet per day (bcf/day), reflecting a 2.1% decline year-over-year. In contrast, demand increased slightly to 66.9 bcf/day, marking a 0.9% rise year-over-year. LNG net flows to U.S. export terminals were at 12.5 bcf/day, up by 4.3% week-over-week.

Electricity Output Bodes Well for Natural Gas

In good news for natural gas demand, U.S. electricity output rose by 3.58% year-over-year to 78,680 gigawatt hours (GWh) for the week ending October 5. The 52-week output also saw an increase of 1.48% year-over-year, totaling 4,154,306 GWh.

Inventory Levels Raise Concerns

A recent EIA report revealed a bearish trend for natural gas prices. Inventories for the week ending October 4 increased by 82 bcf, exceeding expectations, yet fell short of the five-year average increase of 96 bcf. Natural gas inventories stand 2.8% above last year and 5.1% above the five-year average for this time of year, indicating sufficient supply. In Europe, gas storage was 95% full as of October 6, surpassing the typical 91% for this period.

Drilling Activity on the Decline

According to Baker Hughes, the number of active U.S. natural gas drilling rigs dropped by one to 101 in the week ending October 11. This figure is modestly above the recent low of 94 rigs recorded on September 6. The count has notably decreased from a five-year high of 166 rigs in September 2022 and a pandemic-era low of 68 rigs in July 2020.

More Natural Gas News from Barchart

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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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