LONDON (Commodity Online): Natural Gas prices rallied on the day despite a large lower-48 production growth number in the September EIA-914 report.
The prompt contract settled 11 cents higher and finished at $3.63/MMBtu. The front of the curve pulled up the back, with calendar 2012 up by eight cents to $3.83, while calendar 2013 rose by seven cents to $4.40.
The weather outlook showed a colder South and a warmer East for the 6-10 day period in the morning. However, the noon update exhibited significant colder-than-normal weather for the Northeast throughout the 6-15 day period.
In terms of supply and demand, the September EIA -914 Report showed that US gas production broke away from the decelerating growth trend experienced over the past four months. Total lower-48 production grew by 720 MMcf/d m/m, which is far greater than our previous projection of 99 MMcf/d of m/m growth for September and the revised 100 MMcf/d in August.
This could partially be explained by the raging natural gas-directed rig count, which grew to well above 900 by the end of the month. Regionally, every producing area saw m/m growth, with the exception of the Gulf of Mexico, where supply fell by 650 MMcf/d m/m due partly to Tropical Storm Lee.
Wyoming registered the largest gain for the month as the production in the state returned to normal from the large reduction in August caused by gas plant maintenance. Texas and "Other states" (Marcellus) grew by 310 MMcf/d and 260 MMcf/d m/m respectively.
Louisiana, a good proxy for Haynesville production, continued to grow moderately, at 160 MMcf/d m/m. Lower-48 Natural Gas consumption inched up moderately in September ,showing a slight y/y growth of 327 MMcf/d.
Industrial, commercial and residential demand all exhibited increases that were in line with the y/y growth of the previous months. Although power demand has fallen less than the previous month, it has registered a significant decrease of more than 500 MMcf/d.
Cash prices surged at all pricing points mainly reflecting the incrementally colder weather forecast. Henry surged by 30 cents to $3.39, while SocalBorder increased by 18 cents to $3.57. Transco-Z6 New York finished at $3.71, up by 42 cents.
