November Nymex natural gas (NGX26) closed Wednesday down 0.173, a decline of 5.84%.
November natural gas futures tumbled to a contract low and a five-week low for the nearest contract as technical selling intensified following a breakout to fresh downside levels.
Prices have plunged this week on forecasts for above-average U.S. autumn temperatures that could curb heating demand. The Commodity Weather Group indicated Wednesday that outlooks have shifted warmer, with above-average temperatures expected across the Midwest through November 4.
A bearish medium-term factor is the market’s expectation that a “Super El Niño” will deliver warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing heating demand for natural gas.
U.S. Lower-48 dry gas production stood at 112.9 bcf/day on Wednesday, up 5.3% year-over-year, according to BNEF. Lower-48 gas demand reached 72.5 bcf/day, a 1.2% increase year-over-year, while estimated LNG net flows to U.S. export terminals rose 4.1% week-over-week to 20.8 bcf/day.
Adding to bearish sentiment, the U.S. Energy Information Administration (EIA) projected on August 11 that U.S. natural gas storage levels will swell to 3,985 bcf by the end of October—the highest level in a decade and 5% above the five-year average. On September 21, the EIA raised its 2027 U.S. dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.
On the bullish side, the Edison Electric Institute reported last Thursday that U.S. Lower-48 electricity output for the week ended October 10 rose 2.6% year-over-year to 79,435 GWh. Cumulative output for the 52 weeks ending October 10 increased 3.2% year-over-year to 4,416,179 GWh.
The consensus anticipates Thursday’s weekly EIA report will show a build of 81 bcf, smaller than the five-year average injection of 87 bcf for the week.
Last Thursday’s EIA report was supportive for prices, showing a 67 bcf injection for the week ended October 9—below expectations of 74 bcf and the five-year average of 90 bcf. As of October 9, inventories were down 4.1% year-over-year but 1.3% above the five-year seasonal average, signaling adequate supply. As of October 18, European gas storage was 75% full, compared to a five-year seasonal average of 89%.
Baker Hughes reported last Friday that active U.S. natural gas drilling rigs rose by one to 133 in the week ended October 16, just below the three-year high of 135 rigs set on September 25.
