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November natural gas posts impressive gain despite larger storage build

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November natural gas posts impressive gain despite larger storage build

NYMEX November natural gas futures were higher Thursday, Oct. 12, despite the report of a storage injection that beat expectations and matched the five-year average. Short covering ahead of a warming trend that is expected to grip nearly the entire U.S. through the end of October drove the contract to a $3.008/MMBtu intraday and two-week high, before closing the session 10.0 cents higher at $2.989/MMBtu.

The U.S. Energy Information Administration reported a net 87-Bcf injection into natural gas inventories in the Lower 48 during the week that ended Oct. 6 that was above market expectations and matched the five-year average. The market consensus ahead of the report's release called for an 84-Bcf build to stocks, against a year-ago injection of 79 Bcf and the 87-Bcf five-year average. The build brought total U.S. working gas supply to 3,595 Bcf, or 153 Bcf below the year-ago level and 8 Bcf below the five-year average storage level of 3,603 Bcf.

Despite the larger build against expectations and the closely watched five-year average, the total working gas supply continues to lag both the year-ago and five-year average levels and could end the titular injection season Oct. 31 at below 3.9 Tcf.

The driving forces behind the market's ability to build natural gas inventories are weather and production. Production remains robust, slipping week on week by a slight 2% in the review week to Oct. 11, while weather outlooks suggest that more natural gas will be utilized for power consumption in the remaining weeks of October, leaving less to stow in underground storage facilities.

Mixed weather that generated a combination of cooling and heating demand through the review week to Oct. 11 supported total U.S. consumption of natural gas higher by 7% compared with the previous report week, the EIA said in its Natural Gas Weekly Update. Natural gas consumed for power generation climbed 12% week over week, industrial-sector consumption decreased 2% and residential- and commercial-sector consumption increased 18%.

Weather during the current week to Oct. 13 is likely to result in a pullback in the rate of storage injections from this week's level, as early analyst and trader outlooks suggest an injection in the low to mid-60s Bcf.

Looking forward, the six- to 10-day and eight-to 14-day weather maps show above-average temperatures blanketing nearly the entire country. Demand is likely to remain elevated as a result of the warm weather, and injections are expected to be modest.

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Hurricane season remains a factor, as storms hitting the U.S. can impact demand and production. The National Hurricane Center is monitoring Hurricane Ophelia, which was about 715 miles southwest of the Azores at 11 a.m. ET on Thursday. The storm was moving north-northeast at 2 mph and was not expected to impact the U.S.

Day-ahead markets were mixed with the bias to the downside in deals done for Friday delivery.

Northeast markets continued to correct lower as demand falters. Transco Zone 6 NY gave back nearly 45 cents to an index below $2.20, while Tetco-M3 traded similarly lower to an index below 60 cents. A modest loss of about 1 cent at the Henry Hub brought the index there to about $2.90, while Waha and Chicago edged similarly lower to indexes below $2.55 and near $2.75, respectively. SoCal Border and PG&E Gate trades were each less than 5 cents higher to indexes near $2.60 and $3.15, respectively.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.