September Nymex natural gas (NGU26) on Wednesday closed up +0.037 (+1.34%). Nat-gas prices closed higher on Wednesday as forecasts remain warm. Vaisala forecasts continued hotter-than-average temperatures for the Midwest and South for Aug 17-21, and above-normal temperatures for the West for Aug 22-26.
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On the bearish side, the US Energy Information Administration (EIA) on Tuesday 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. US nat-gas inventories are currently +6.7% above their 5-year seasonal average, a sign of robust supplies. Nat-gas prices also have some negative carryover from last Tuesday when Energy Transfer announced that the Hugh Brinson pipeline will be able to operate at its full transportation capacity of 1.5 bcf/day by September 1, allowing more gas supplies to flow from the Permian Basin to the US benchmark Henry Hub in Erath, Louisiana, boosting US domestic supplies.
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. US (lower-48) dry gas production on Wednesday was 112.7 bcf/day (+3.2% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 82.2 bcf/day (-3.1% y/y), according to BNEF.
Estimated LNG net flows to US LNG export terminals on Wednesday were 18.3 bcf/day (-1.4% w/w), according to BNEF. As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended August 8 rose +7.0% y/y to 99,864 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending August 1 rose +2.3% y/y to 4,357,109 GWh.
The consensus is for Thursday's weekly EIA report to show a +31 bcf increase for the week ended Aug 7, just below the 5-year average for the week of +33 bcf. Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended July 31 rose by +33 bcf, above expectations of +30 bcf and above the 5-year weekly average increase of +23 bcf. As of July 31, nat-gas inventories were down -0.4% y/y, and +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.
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