Natural Gas Prices Drop Amid Milder Weather Forecasts
November Nymex natural gas (NGX24) fell sharply on Wednesday, closing at -0.131 (-5.24%).
Weather Predictions Impact Demand
Nat-gas prices plummeted to a one-month low, driven by forecasts of mild autumn weather across the U.S. According to Atmospheric G2, weather models indicate above-normal temperatures from October 21-25, which are likely to curb heating demand for natural gas.
Production and Demand Statistics
Lower-48 state dry gas production stood at 100.9 billion cubic feet per day (bcf/day), a 2.8% decrease compared to last year, as reported by BNEF. Gas demand, on the other hand, rose to 76 bcf/day, reflecting a 3.7% increase year-over-year. Additionally, LNG net flows to U.S. export terminals reached 13.2 bcf/day, showing a weekly increase of 6.2%.
Electricity Output and Natural Gas Demand
The increase in electricity generation is a promising sign for natural gas consumption among utility providers. The Edison Electric Institute reported a 3.58% year-over-year rise in total U.S. electricity output for the week ending October 5, totaling 78,680 GWh. Over the past 52 weeks, output increased by 1.48% to 4,154,306 GWh.
Inventory Expectations
Analysts anticipate that Thursday’s weekly EIA report will show natural gas inventories climbing by 76 bcf, falling short of the five-year average gain of 96 bcf for this time of year. The previous week’s EIA report indicated a bearish trend, with inventories rising by 82 bcf, surpassing expectations of 71 bcf but still below the five-year average.
European Gas Storage Levels
As of October 13, Europe’s gas storage was 95% full, exceeding the five-year average of 92% for this period. This suggests robust global supply levels.
Trends in Drilling Activity
Baker Hughes reported a decline in active U.S. natural gas drilling rigs, with numbers falling by one to 101 rigs as of October 11. This figure is slightly above the three-and-a-third-year low of 94 rigs recorded on September 6. Since reaching a five-year peak of 166 rigs in September 2022, activity has decreased, contrasting sharply with the pandemic-era low of 68 rigs in July 2020.
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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 here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
