Natural Gas News: ERCOT Demand Hits Records but Supply Holds Firm
Baker Hughes reported active U.S. natural gas rigs fell by one to 127 in the week ended August 21. The rig count remains close to the three-year high of 134 reached in February. One rig is not a drilling retreat. Producers are still active and there is nothing in this report that changes the production outlook.
Energy Transfer said the Hugh Brinson pipeline will reach its full transportation capacity of 1.5 billion cubic feet per day by September 1. The pipeline will move more Permian Basin gas to Henry Hub in Erath, Louisiana, adding to supply at the benchmark delivery point just as storage season is nearing its peak. The weather is hot now. Additional pipeline capacity arrives in early September and that supply does not care about the temperature in West Texas.
European storage was 62% full as of August 19, below the five-year seasonal average of 79%.
The medium-term weather risk is a powerful El Niño pattern that could bring warmer-than-normal conditions to the Northern Hemisphere during the fall and winter. That is not Friday’s trade, but it will move closer to the front of the market as summer ends.
What to Watch
The next weather forecasts are the immediate trigger. Buyers need the heat centered on Texas and the Southwest to hold long enough to keep ERCOT demand near record levels, and any change in the model that shortens the hot pattern or pulls temperatures back takes the bid with it.
Production and LNG flows are the supply side numbers that matter with the next update. Storage is above the five-year average and production is running higher than last year. The Hugh Brinson pipeline coming online in September adds more Permian gas to Henry Hub just as the market heads into the final stretch of injection season. Hot weather can keep natural gas supported in the short term. It has not changed the larger supply story.
The market is stuck between two retracement zones with the 50-day moving average still overhead at $2.920. That range holds until something on the fundamental side breaks it.
More Information in our Economic Calendar.