Nat-Gas Prices Fall Ahead of Opening of Texas Pipeline

Nat-gas prices declined on Friday, with the Nymex contract settling down 0.026 (-0.89%) ahead of a new pipeline's launch in Texas. Energy Transfer LP's Hugh Brinson pipeline, set to start service on September 1, will transport 2.2 billion cubic feet of gas per day from the Permian Basin to East Texas. This could increase domestic gas supplies at Erath, Louisiana, a hub for US gas futures trading on the Henry Hub.

The price dip was mainly due to hot weather expected in the US next week, which may boost natural gas demand from electricity providers as people use more air conditioning. BNEF reported that US electricity output increased 6.1% year-over-year to 100,895 gigawatt hours in the week ending August 22, while weekly output rose 2.2% year-over-year to 4,365,212 gigawatt hours.

US dry gas production was 113.0 billion cubic feet per day on Friday, up 4.5% year-over-year. Gas demand in the lower 48 states was 78.9 billion cubic feet per day, a 8.2% year-over-year increase. However, US Energy Information Administration forecasts suggest higher storage levels, with 3,985 billion cubic feet of gas expected in US storage as of October, the highest in 10 years.

Bearish factors include projected higher US nat-gas storage, ample inventories, and speculation about a strong El Niño weather system that could reduce heating demand in the Northern Hemisphere. Gas inventories increased by 15 billion cubic feet week-over-week, but were still below the 5-year weekly average. European gas storage was at 64% capacity, lower than the 5-year average of 81%.