November natural gas (NGX12.NYM) moves to the near-month spot. November natural gas rose from $3.023/MMBtu last Wednesday to $3.395/MMBtu Wednesday, October 3. The November contract opened Thursday last week 29 cents higher than Henry Hub spot price and continued to climb throughout the reporting week ended October 3, peaking at $3.531 on Tuesday.
Henry Hub spot price up 29 cents from $2.92 to $3.21. Rotary rig count fell 19 to 435 active units on the week ended September 28 -- Oil-directed rig count increased by 8 to 1,410 units.
Total demand softened over the report week and overall natural gas consumption was lower 0.3%. Industrial sector consumption down 1.3% -- residential/commercial consumption lower 4.4% but these losses were almost offset by a 2.7% gain in consumption for power generation. The Southeast region, the largest consumer of natural gas for power generation, burned 11.7% more nattie week-over but Texas, the state with the largest consumption, burned 12% less week-over.
Total supply showed a slight increase on the week, up 0.3%, averaging around 70.2 Bcf/day driven by a 0.2% production uptick. Imports from Canada up 1.0% driving overall supply slightly higher. Imports to the Western region were up 8.2% week-over and 23.8% above year-over.
Inventories increase this week again to 3,653 Bcf as of Friday, September 28. This week's injection 1 Bcf below 5-year average injection of 78 Bcf -- 24 Bcf below last year's injection of 101 Bcf. Current inventories 272 Bcf (8.0%) higher year-over-year and 281 Bcf (8.3%) above the five-year average. All three storage regions posted gains this week -- East Coast up 42 Bcf, 5 Bcf below five-year -- Western region adding 8 Bcf, 1 Bcf off five-year -- Producing (Southern) region added 13 Bcf to nattie storage from salt cavern facilities and 14 Bcf from non-salt cavern facilities for a total of 27 Bcf added.
Temperatures during the reporting week were down 0.4 degrees on the 30-year average and 3.4 degrees cooler year-over. Warmer temperatures in the West, Mountain and Pacific Census divisions were 4.6 degrees above 30-year, but cooler temperatures prevailed across the rest of the nation in the range of 5 degrees cooler than 30-year.
Natural gas drilling activity in the U.S. Gulf of Mexico generally increased over the reporting week, doubling the rig count over last year this time. The Bureau of Safety and Environmental Enforcement has resumed shallow well permitting and producers are taking advantage. 162 applications have been submitted since June 8. By October 3, only 6 were still pending approval.
Look for falling temperatures and snow across the northern plains to begin pressing demand, although most regions of the nation are within a comfortable temperature range and will not be firing up the home heaters just yet.
Currently (10:00 CT), November natural gas near-contract futures trading at $3.39, two cents lower on the day . Look for the November contract to stay below $3.44 until nationwide temperatures drop in earnest, sparking fresh demand for home heating.