December Nymex natural gas (NGZ24) on Tuesday closed higher by +0.062 (+1.84%)
Dec nat-gas prices Tuesday recovered from early losses and settled moderately higher on expectations for colder US weather to boost heating demand for nat-gas. Forecaster Maxar Technologies said Tuesday that the eastern part of the US is expected to see below-normal temperatures from December 1-5.
Nat-gas prices rallied sharply last week to a 1-year high last Friday on carryover support from a rally in European nat-gas prices to a 1-year high. Escalation of the Ukraine-Russia conflict lifted European gas prices after Russia launched a hypersonic missile into Ukraine. Also, the US last Thursday sanctioned Gazprombank, the last major Russian financial institution some central European countries use to pay for the gas they still buy from Russia, which increases the risk of a cut off of some of the remaining Russian natural gas flows to Europe.
Lower-48 state dry gas production Tuesday was 103.9 bcf/day (+0.1% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 89.4 bcf/day (-4.1% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.9 bcf/day (+1.8% w/w), according to BNEF.
An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended November 16 rose +2.06% y/y to 7,764 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 16 rose +1.8% y/y to 4,165,449 GWh.
The consensus is that Wednesday's weekly EIA nat-gas inventories (released one day early due to Thursday's Thanksgiving Day holiday) will fall by -1 bcf for the week ended November 22, a smaller draw than the five-year average of -30 bcf.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended November 15 unexpectedly fell -3 bcf versus expectations of +1 bcf, although a smaller draw than the 5-year average draw for this time of year of -16 bcf. As of November 15, nat-gas inventories were up +3.7% y/y and were +6.4% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 90% full as of November 19, slightly below the 5-year seasonal average of 91% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending November 22 fell -2 rigs to 99 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs. Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
