Recent price swings in gas futures pushed at-the-money implied volatility, a determinant of option premiums, to 51.3% on Tuesday, its highest since January. Over the past year, implied volatility has swung wildly, hitting a record high of 117.5% in November and a record low of 18.6% in April.
Over the next 6-10 days, the US National Weather Service (NWS) forecast temperatures in the Lower 48 US states would remain colder than normal over much of the country except for a strip along the East Coast. That cold will moderate as it moves east over the 8-14 day period, covering almost all of the country except the extreme Southeast, NWS said.
Refinitiv projected average gas demand in the Lower 48 states, including exports, would rise to 96.9 billion cubic feet per day (bcfd) next week, up from its forecast on Tuesday of 95.2 bcfd after meteorologists boosted their cold outlooks.
That compares with expected average demand of 86.9 bcfd for this week.
Gas flows to liquefied natural gas (LNG) export plants eased to 7.1 bcfd on Tuesday from a record 7.2 bcfd on Monday, according to Refinitiv data. That compares with an average of 6.7 bcfd last week.
Pipeline flows to Mexico edged up to 5.4 bcfd on Tuesday from 5.3 bcfd on Monday, according to Refinitiv data. That compares with an average of 5.5 bcfd last week and an all-time daily high of 6.2 bcfd on September 18.
Analysts said utilities likely added a bigger-than-usual 91 billion cubic feet (bcf) of gas to storage during the week ended October 18. That compares with an injection of 62 bcf during the same week last year and a five-year (2014-18) average build of 73 bcf for the period.
The increase during the prior week ended October 11 boosted total inventories over the five-year average for this time of year for the first time since September 2017.
The increase for the week of October 18 is expected to further that surplus to 3.610 trillion cubic feet, topping the five-year average of 3.578 tcf by 0.9%.
The amount of gas in inventory was as much as 33% below the five-year average in March 2019. But with production close to a record high, analysts said stockpiles should end the summer injection season above normal levels at almost 3.8 tcf on October 31.
Gas production in the Lower 48 states eased to 94.04 bcfd on Tuesday from 94.41 bcfd on Monday, according to Refinitiv data. That compares with an average of 93.80 bcfd last week and an all-time high of 94.44 bcfd on October 19.