Surveys are running from 50 bcf to 53 bcf for Thursday’s EIA report. Last week’s 44 bcf build came in below the 48 bcf estimate and well below the five-year average of 74 bcf. Inventories as of September 11 were 3.7% above the five-year seasonal average and 3.9% below a year ago.
Wednesday’s rally happened on the shrinking surplus story. Traders pushed October natural gas futures to their best level in about two and a half months. Thursday’s early move to $3.076 showed buyers still wanted to own it. The break from that high shows they are not willing to keep taking offers before the number hits. The two-day rally needs a build below 50 bcf to hold together.
The Weather Turned and Demand Is Falling With It
Commodity Weather Group sees normal seasonal conditions across most of the country from September 28 through October 2. NatGasWeather has low demand over the next seven days with bearish patterns over the next 15 to 20 days.
Lower-48 gas demand was 74.0 bcf per day Wednesday, down 4.9% from a year earlier according to BNEF. Production was 112.1 bcf per day, up 2.9% from a year ago according to BNEF. Output fell about 4 bcf per day from the prior week but the base is still running well above last year. LNG flows to U.S. export terminals were 18.5 bcf per day, down 0.9% from the prior week. Demand falling, production elevated, exports flat. That is the balance sheet the EIA report drops into Thursday afternoon.
The Supply Numbers Keep the Ceiling Low
The EIA projected end-of-October storage near 3,985 bcf. That would be the highest in a decade and 5% above the five-year average. The EIA also raised its 2027 dry natural gas production forecast to 116.0 bcf per day from 115.3 bcf per day in July. More gas next year on top of a storage number that is already running ahead of normal.
Baker Hughes reported 134 active natural gas rigs in the week ended September 18. This matched the three-year high from February. The rig count is not showing a drilling pullback. The rig count, the production forecast, and the El Niño outlook are all sitting on top of a two-day rally that started on one light storage build.
What to Watch
The EIA report drops into a market that already faded from $3.076 to below $3.000 on the estimate alone. The two-day rally started on one light storage build and a hotter late-summer forecast. Commodity Weather Group and NatGasWeather have both shifted cooler since Wednesday. Lower-48 gas demand is down 4.9% from a year ago according to BNEF. The rally has the storage drawdown and nothing else right now.
October natural gas futures need to regain $3.044 after Thursday’s break. November natural gas futures need to hold above the $3.129 to $3.070 retracement zone. The main trends are up on both contracts. The momentum faded before the report. A build below 50 bcf is what keeps the breakout trade alive heading into the weekend.
More Information in our Economic Calendar.
