Natural Gas Prices Hit One-Month Low Amid Warm Weather Forecasts
November Nymex natural gas (NGX24) prices fell on Thursday, ending at -0.020 (-0.84%).
Continuing the trend from Wednesday, natural gas prices are now at a one-month low. Predictions of warmer-than-average temperatures across the U.S. are likely to decrease the demand for heating, applying downward pressure on prices. Notably, Maxar Technologies reported that warmer conditions are expected in the western U.S. from October 22-26. Despite the price drop, losses were somewhat cushioned as the EIA reported an increase in nat-gas inventories by +76 bcf, aligning with expectations but still falling short of the five-year average of +96 bcf for this period.
According to BNEF, dry gas production in the lower 48 states averaged 102.3 bcf/day, a decline of -1.1% compared to last year. Conversely, gas demand in these states was 73.5 bcf/day, marking an increase of +1.7% year over year. Additionally, LNG exports to U.S. terminals rose to 13.9 bcf/day, an increase of +16.6% week-over-week.
A boost in U.S. electricity production is beneficial for natural gas demand from utility companies. The Edison Electric Institute indicated that for the week ending October 12, total U.S. electricity output surged by +6.76% year over year to 73,640 GWh. In the preceding 52-week span, there was a year-over-year increase of +1.62% to 4,158,968 GWh.
This week’s EIA report created a neutral outlook for natural gas prices, as inventories rose by +76 bcf for the week ending October 11, which was as expected but lower than the five-year average of +96 bcf. As of October 11, inventories were +2.2% higher year over year and +4.6% above the five-year seasonal average, indicating sufficient natural gas supplies. Meanwhile, Europe’s gas storage was reported at 95% full as of October 13, slightly above its five-year average of 92% for this time of year.
Baker Hughes noted last Friday that the number of active natural gas drilling rigs in the U.S. decreased by one to a total of 101 rigs by the week ending October 11. This figure is slightly above the three-and-a-half-year low of 94 rigs recorded on September 6. Active rigs have experienced a decrease since reaching a five-year peak of 166 rigs in September 2022, moving down from a pandemic-era low of 68 rigs in July 2020, based on data since 1987.
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On the date of publication,
Rich Asplund
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