Oct Nymex natural gas (NGV22) on Wednesday closed up by +0.217 (+3.26%).
Oct nat-gas Wednesday recovered from a 2-1/2 month low and closed moderately higher. Â Nat-gas prices Wednesday shook off early losses on positive carry-over from an +11% surge in European nat-gas prices. Â European nat-gas prices soared Tuesday and Wednesday after Gazprom PJSC warned there is a risk Russia will sanction Ukraine's Naftogaz and prevent it from being able to pay transit fees, which would put at risk gas flows to Europe via Ukraine. Â
Also, this week's sabotage of the Nord Stream 1 undersea nat-gas pipeline and the massive leak under the ocean means there will be no near-term chance that Russian might reopen the pipeline to begin delivering gas to Europe again. Â Prior to the explosions, Russian's state-owned gas company Gazprom had cut off the delivery of gas through that pipeline to Europe under the pretext of technical issues.
Reduced U.S. nat-gas production is supportive for prices after the Bureau of Safety and Environmental Enforcement said U.S. energy companies idled 5.95% or 128 mcf/day of daily gas production in the Gulf of Mexico due to the approach of Hurricane Ian. Â
Nat-gas prices Wednesday initially fell to a 2-1/2 month low on concern that Hurricane Ian will inflict catastrophic damage to Floria and reduce nat-gas demand. Â Also, the outlook for mild U.S. fall temperatures that curb heating demand for nat-gas weighs on prices. Â The Commodity Weather Group said it expects above-normal temperatures in the western and central U.S. from October 2-6, with normal temperatures expected in the East. Â
Lower-48 state total gas production on Wednesday was 100.5 bcf, up +5.7% y/y. Â Lower-48 state total gas demand on Wednesday was 66.2 bcf/day, up +7.7% y/y. Â LNG net flow to U.S. LNG export terminals Wednesday was 12.1 bcf/day, up +4.2% w/w.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. Â The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Sep 24 rose +4.7% y/y to 79,329 GWh (gigawatt hours). Â Also, cumulative U.S. electricity output in the 52-week period ending Sep 24 rose +2.7% y/y to 4,125,781 GWh.
Nat-gas prices have support as EU countries agreed to cut nat-gas demand from Russia by 15% over the next eight months. Â Also, Russia recently slashed nat-gas exports to Europe to 20% of capacity, putting upward pressure on European nat-gas prices. Â Russia has already halted nat-gas shipments to Demark, Finland, Bulgaria, Netherlands, Poland, and Latvia and reduced supplies to Germany for not acceding to its demand for gas payments in Russian rubles.
Nat-gas prices have seen downward pressure from the prolonged outage at the Freeport LNG export terminal, which curbed U.S nat-gas exports and put upward pressure on domestic supplies. Â The Freeport terminal accounted for about 20% of all U.S. nat-gas exports before the explosion on June 8 knocked it offline. Â The Freeport LNG terminal receives about 2 bcf, or 2.5%, of the output from the lower-48 U.S. states. Â The Freeport terminal said Aug 23 that it won't reopen until early to mid-November, later than a previous announcement of a restart in October.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb +94 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices as it showed U.S. nat gas inventories rose +103 bcf to 2,874 bcf in the week ended Sep 16, above expectations of a +95 bcf increase and above the  5-year average of +81 bcf.  However, inventories remain tight and are down -6.7% y/y and -10.4% below their 5-year seasonal average.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended Sep 23 fell by -2 rigs to 160, falling back slightly from a 3-year high of 166 rigs the week ended Sep 9. Â Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).
Â
More Natural Gas News from Barchart
/A%20concept%20image%20of%20space_%20Image%20by%20Canities%20via%20Shutterstock_.jpg)
/A%20photo%20of%20a%20Sandisk%20Solid%20State%20Drive%20by%20Top%20Popular%20Vector%20by%20Shutterstock.jpg)
/Broadcom%20Inc%20logo%20on%20phone%20and%20site-by%20Majahid%20Mottakin%20via%20Shutterstock.jpg)