October Nymex natural gas (NGV26) on Friday closed down -0.026 (-0.89%).
Nat-gas prices settled lower on Friday ahead of Energy Transfer LP’s scheduled start date next week for its Hugh Brinson pipeline in Texas. The pipeline, scheduled to begin service on September 1, will be able to move about 2.2 bcf/day of gas from the Permian Basin to East Texas, potentially boosting domestic nat-gas supplies at Erath, Louisiana, where benchmark US gas futures are traded at the Henry Hub.
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Losses in nat-gas prices were limited on Friday ahead of hot US weather next week, which could boost nat-gas demand from electricity providers to power increased air-conditioning use. According to the Commodity Weather Group, above-average temperatures are expected across the eastern two-thirds of the US from September 2-11.
As a positive factor for gas prices, the Edison Electric Institute reported 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.
US (lower-48) dry gas production on Friday was 113.0 bcf/day (+4.5% y/y), according to BNEF. Lower-48 state gas demand on Friday was 78.9 bcf/day (+8.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Friday were 19.5 bcf/day (+10.0% w/w), according to BNEF.
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. US nat-gas inventories are currently +6.7% above their 5-year seasonal average, a sign of robust 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.
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 25, gas storage in Europe was 64% full, compared to the 5-year seasonal average of 81% full for this time of year.