October Nymex natural gas (NGV26) on Tuesday closed down -0.031 (-1.06%).
Nat-gas prices settled lower on Tuesday as US weather forecasts turned cooler, potentially reducing nat-gas demand from electricity providers to power air-conditioning. According to forecaster Vaisala, temperatures are expected to fall below normal in the Northeast at the beginning of this weekend.
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Losses in nat-gas prices were limited on Tuesday due to carryover support from a rally in European nat-gas prices. Fears that the closure of the Strait of Hormuz will be prolonged due to escalation of the US-Iran war pushed European nat-gas prices to a 3.5-year high on Tuesday. Europe receives about 10% of its nat-gas supplies through the strait from Qatar.
US (lower-48) dry gas production on Tuesday was 114.0 bcf/day (+5.5% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 79.7 bcf/day (+14.7% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 19.5 bcf/day (+12.0% w/w), according to BNEF.
As a positive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended August 22 rose +6.1% y/y to 100,895 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending August 22 rose +2.2% y/y to 4,365,212 GWh.
As a bearish factor, the US Energy Information Administration (EIA) on August 11 projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average. On Monday, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.
A bearish medium-term factor for nat-gas prices is speculation that a powerful El Niño weather system will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing nat-gas heating demand.
Last Thursday’s weekly EIA report supported nat-gas prices, showing a +15 bcf increase in US nat-gas inventories for the week ended August 21, right on expectations but below the 5-year weekly average of +33 bcf. As of August 21, nat-gas inventories were down -1.0% y/y and +5.5% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of August 30, gas storage in Europe was 65% full, compared to the 5-year seasonal average of 82% full for this time of year.
