The EIA projects end-of-October storage near 3,985 bcf, 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.
Baker Hughes reported Friday that active natural gas rigs rose by one to 135, a new three-year high. That is the number the market was watching. Thursday’s squeeze ran through a rig count that keeps climbing. Friday’s sell-off landed on top of a new high in drilling activity. Producers at these prices are not pulling back.
Power Demand Is Strong but It Is Not Enough
The Edison Electric Institute reported lower-48 electricity output rose 16.1% from a year earlier to 94,427 gigawatt hours in the week ended September 12. Trailing 52-week generation was up 3.3% to 4,405,549 gigawatt hours. The power numbers are the best demand figure in the report. They have not been strong enough to offset production near record levels, adequate storage, and slipping LNG feedgas.
European gas storage was 70% full as of September 23 against an 86% five-year average. That keeps U.S. LNG exports relevant heading into winter. It did not keep Friday’s sellers from pressing November natural gas futures back below $3.264.
A possible Super El Niño is the medium-term risk pressing on the deferred contracts. A warmer Northern Hemisphere fall and winter would reduce heating demand when the market is already carrying adequate supply into the season.
