Natural Gas Prices Fall on Mild Autumn Weather, US Natural Gas Stocks

Natural gas prices took a hit on Thursday, dropping to a five-month low as mild autumn weather softened demand expectations. Moderate temperatures generally reduce demand for natural gas for both heating and cooling.
Specifically, natural gas for November delivery fell 2.4 percent, to $2.524 per million British thermal units, on the NYMEX; that’s its lowest price since April and the largest one-day loss in two weeks, according to The Wall Street Journal. What’s more, natural gas prices have now fallen in four of the last five quarters, dropping 11 percent since June 30.
Meanwhile, the US Energy Information Administration (EIA) recently reported that US natural gas stocks increased by 98 billion cubic feet (Bcf) last week. That’s 454 Bcf higher than the same period in 2014, and 152 Bcf above the five-year average of 3,386 Bcf; however, the increase in stocks was less than experts expected — 17 analysts and traders surveyed by The Wall Street Journal expected a rise of 100 Bcf.

Weather affecting natural gas price

Nevertheless, even the lower-than-expected rise in natural gas stocks has added to long-term oversupply concerns. The rise, coupled with the current mild weather, will likely continue to put pressure on natural gas prices. That’s especially true given that weather forecasts in large areas of the US are pointing to above-normal temperatures for the first two weeks of October, likely meaning lower energy consumption for a period that usually spurs demand.
The arrival of Hurricane Joaquin on the east coast of the US will also likely keep prices suppressed as the storm is expected to prolong the higher-than-average temperatures. There is also fear that the hurricane will lead to oil and gas platforms being shut down as a precaution, as was the case with Hurricanes Katrina and Rita in 2005. What’s more, depending on the strength of the storm when it reaches the east coast, it could also cause damage to refineries and transportation.

Company news

Veresen (TSX:VSN) hit a significant milestone on Wednesday. The company announced that the US Federal Energy Regulatory Commission (FERC) has issued a final environmental impact statement for its Jordan Cove LNG project and Pacific Connector gas pipeline in Oregon.
The company’s application with the FERC was for the approval to construct a LNG export terminal at Coos Bay and a 232-mile natural gas pipeline from the terminal to Malin, Oregon.
“We have worked closely with federal, state and local regulatory agencies and with local communities over the past three years, and I’m extremely proud of all the effort and due diligence undertaken to ensure that the terminal and pipeline are designed to meet or exceed all of the required environmental standards,” Veresen’s president and CEO, Don Althoff, said.
According to the press release, Jordan Cove LNG will be one of the largest commercial ventures in the state’s history and is expected to benefit the region through job creation and community investment.

Alberta-based oil and natural gas producer Penn West Petroleum (TSX:PWT,NYSE:PWE) announced the sale of its non-operating, 9.5-percent working interest in the Weyburn oil unit for $205 million cash. With this sale, the company has raised $810 million in total proceeds; the money will go towards its senior debt.
Penn West also reduced its annual production guidance range to 84,000 to 88,000 barrels of oil per day from 86,000 to 90,000.
 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
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