On Wednesday, November Nymex natural gas (NGX24) prices closed up by $0.031, or 1.34%, as market analysts anticipate a rise in inventory levels.
The expected increase of 66 billion cubic feet (bcf) in Thursday’s weekly International Energy Agency (IEA) inventory report is lower than the five-year seasonal average increase of 76 bcf for this week. Mixed weather forecasts from Maxar suggest a colder trend in the West, while the East may experience slightly warmer temperatures.
According to Bloomberg New Energy Finance (BNEF), dry gas production in the Lower 48 states stood at 100.7 bcf per day on Wednesday, reflecting a 3.9% year-on-year decrease. Gas demand in the same region was reported at 71.4 bcf per day, down by 1.2% compared to the previous year. Additionally, liquefied natural gas (LNG) net flows to U.S. export terminals dropped to 12.1 bcf per day, a 13% week-over-week decline.
The increasing output of electricity in the U.S. presents a favorable outlook for natural gas demand from utility providers. The Edison Electric Institute reported that total electricity output for the Lower 48 states rose by 2.59% year-on-year to reach 70,893 gigawatt hours (GWh) in the week ending October 19. Over the past 52 weeks, U.S. electricity output increased by 1.68% year-on-year, totaling 4,160,757 GWh.
In its last report, the U.S. Energy Information Administration (EIA) indicated a neutral outlook for natural gas prices, with inventories increasing by 76 bcf for the week ending October 11, matching expectations but falling short of the five-year average build of 96 bcf for this time of year. As of October 11, natural gas inventories were up by 2.2% year-on-year and 4.6% above the five-year seasonal average, suggesting ample supply. In Europe, gas storage levels were reported at 95% capacity as of October 20, surpassing the five-year average of 92% for this period.
Furthermore, Baker Hughes reported a decline in active U.S. natural gas drilling rigs. As of the week ending October 18, the number of active rigs fell by two to a total of 99, slightly above the three-and-a-third-year low of 94 rigs recorded on September 6. This marks a significant drop from the five-year high of 166 rigs seen in September 2022, following a pandemic-era low of 68 rigs in July 2020.
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