Natural Gas Storage Seen Flat Year-Over-Year as Bearish Bets Rise

The latest US Energy Information Administration (EIA) weekly natural gas storage report is expected to show a modest injection of 79 billion cubic feet (Bcf) for the week ending October 2. This figure is slightly higher than the 77 Bcf build from the same week last year, reducing the year-over-year deficit to 136 Bcf from 138 Bcf. However, it would also decrease the surplus to the previous five-year average to 62 Bcf from 79 Bcf.

After a period of unusually warm temperatures across the Lower 48 states, the latter part of September saw a return to more seasonal weather patterns. Cooling Degree Days (CDDs) across the continental United States totaled 19 last week, just 7% above the norm. This shift helped drive down NGI’s Weekly Southeast Regional Average by 23.5 cents to $2.97 and the NGI’s Weekly Henry Hub index by a nickel to $2.975.

Speculators appear to be growing more bearish on natural gas prices. NGI’s calculations from Commodity Futures Trading Commission (CFTC) data indicate that the managed money segment increased its net short position in Henry Hub index price futures by 72% last week, the largest week-over-week change since August 4. This increase in bearish sentiment comes as Lower 48 producers showed little urgency to ramp up activity, with a one-rig decline in the Baker Hughes US rig count offsetting a one-unit increase in the Primary Vision frac spread count.

Lower 48 dry gas production averaged 108.4 Bcf per day last week, down from 110.9 Bcf per day the previous week, partly due to a leak on the Columbia Gas Transmission system. Moderating temperatures led to a 4.0 Bcf per day decline in deliveries to power generators, although this was partially offset by increased residential/commercial and industrial consumption. Gas shipments to LNG liquefaction facilities remained steady at 18.4 Bcf per day.