Natural Gas Storage Report Expected to Show Modest Injection Amid Bearish Speculation

The latest US Energy Information Administration (EIA) weekly natural gas storage report, covering the week ended October 2, is expected to show a modest injection of 79 billion cubic feet (Bcf). This would slightly reduce the year-over-year deficit to 136 Bcf from 138 Bcf but trim the surplus to the five-year average to 62 Bcf from 79 Bcf. After a period of unusually warm temperatures, late September saw a return to more typical weather conditions, with Cooling Degree Days (CDDs) across the continental US only 7% above normal. This shift contributed to a decline in natural gas prices, with NGI’s Weekly Henry Hub index dropping by a nickel to $2.975.

Speculators appear to be adopting a more bearish stance on natural gas prices. NGI’s analysis of Commodities Futures Trading Commission (CFTC) data indicates that managed money increased its net short position in Henry Hub futures by 72% last week, marking the largest week-over-week change since August 4. This significant shift in positioning suggests potential further downward pressure on Henry Hub prices.

Production activity in the Lower 48 states remained subdued, with a slight decrease in the number of rigs and frac spreads. Lower 48 dry gas production averaged 108.4 Bcf per day last week, down from 110.9 Bcf per day the previous week. This decline was partly due to a leak on the Columbia Gas Transmission system. Moderating temperatures also led to a decrease in gas deliveries to power generators, though this was partially offset by increases in residential, commercial, and industrial consumption. Gas shipments to LNG liquefaction facilities remained steady at 18.4 Bcf per day.