April Nymex natural gas (NGJ24) on Monday closed up by +0.048 (+2.90%).
Nat-gas prices rallied moderately on Monday, based on forecasts for colder US temperatures, which will boost heating demand for nat-gas. The Commodity Weather Group on Monday said forecasts shifted cooler for the East Coast and the Midwest between March 23-27.
Nat-gas prices have collapsed this year and plunged to a 3-1/2 year nearest-futures low (H24) in late February as an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average. The US Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices.
Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas. The unit reopened last week. However, Freeport said last Friday that once the production unit is reopened, the other two units will be taken down for maintenance, and all three units will not be back online until May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.
Lower-48 state dry gas production Monday was 100.3 bcf/day (+0.6% y/y), according to BNEF. Lower-48 state gas demand Monday was 85.5 bcf/day (-8.1% y/y), according to BNEF. LNG net flows to US LNG export terminals Monday were 13.4 bcf/day (-1.2% w/w), according to BNEF.
A decrease in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US electricity output in the week ended March 9 fell -2.8% y/y to 71,741 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending March 9 was unchanged y/y at 4,100,233 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended March 8 fell by -9 bcf, more than expectations of -2 bcf, although the -9 bcf decline was much smaller than the 5-year average decline of -87 bcf for this time of year. As of March 8, nat-gas inventories were up +17.9% y/y and were +37.1% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 60% full as of March 13, above the 5-year seasonal average of 43% 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 March 15 rose by +1 rig to 116 rigs, just above the 2-year low of 113 rigs posted September 8. Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
