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Gas Prices Plummet on Pipeline Fix
28 Sep
Summary
- Nat-gas futures dropped as a pipeline outage concern faded.
- Warm autumn forecasts point to reduced heating demand.
- US gas storage is projected at a 10-year high.
Natural gas prices saw a significant drop on Monday, with October Nymex natural gas closing down 6.13%. This decline was largely attributed to the lifting of a force majeure on the Mountaineer Xpress pipeline in West Virginia. The repair of this pipeline on the Columbia Gas Transmission system eased fears of a sustained outage, which had previously driven prices to a 2.5-month high.
Further downward pressure on prices came from weather forecasts indicating warmer-than-average temperatures across much of the US this autumn. This suggests a potential decrease in heating demand for natural gas during the fall and winter seasons, especially with a 'Super El Niño' event predicted for the Northern Hemisphere.
Market data from Monday showed US dry gas production at 110.3 bcf/day, while demand was recorded at 67.6 bcf/day. LNG net flows to export terminals remained robust at 19.0 bcf/day. However, projections indicate that US natural gas storage levels are set to reach 3,985 bcf by the end of October, marking the highest level in a decade and exceeding the five-year average by 5%.
Despite positive news regarding a year-over-year increase in US electricity output, bearish factors continue to weigh on the market. These include ample storage levels and revised projections for increased US dry gas production in 2027. The number of active US natural gas drilling rigs also reached a three-year high of 135 as of the week ended September 25.
