December Nymex natural gas (NGZ23) on Tuesday closed sharply higher by +0.223 (+6.65%).
Nat-gas prices Tuesday rallied sharply on the outlook for colder temperatures, which will boost heating demand for nat-gas. Forecaster Maxar Technologies on Tuesday said forecasts have skewed colder for the Midwest and South from Nov 5-9.
Nat-gas prices have support from concern about global supplies after Chevron shut down a nat-gas production field in Israel earlier this month because of safety concerns tied to the Israel-Hamas conflict. As a result of the drop in fuel flows, Egypt said it is re-examining plans to export LNG to Europe.
Lower-48 state dry gas production Tuesday was 103.5 bcf/day (+3.0% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 80.7 bcf/day (+15.9% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals on Tuesday were 13.3 bcf/day (-3.1% w/w), according to BNEF.
High inventories caused by carryover from the mild 2022/23 winter and weak heating demand have undercut nat-gas prices. Gas storage across Europe was 99% full as of October 29, above the 5-year seasonal average of 90% full for this time of year. U.S. nat-gas inventories as of October 20 were +5.2% above their 5-year seasonal average.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended October 21 fell -1.0% y/y to 69,105 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending October 21 fell -0.6% y/y to 4,091,935 GWh.
Last Thursday's EIA nat-gas inventories report for the week ended Oct 20 showed an increase of +74 bcf, which was less than the consensus of +79 bcf but above the 5-year average of +66 bcf. As of Oct 20, nat-gas inventories were up +9.0% y/y and were +5.2% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended October 27 fell by -1 rig to 117 rigs, modestly above the 19-month low of 113 rigs posted Sep 8. Active rigs this year have fallen back after climbing to a 4-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.
