January Nymex natural gas (NGF24) on Tuesday closed down -0.120 (-4.94%), adding to Monday's -5.81% plunge.
Nat-gas prices Tuesday extended Monday's plunge, posting a new 6-month nearest-futures low as early winter U.S. temperatures are forecast to remain above average into January, curbing heating demand for nat-gas. Forecaster Atmospheric G2 said above-normal temperatures are expected to dominate most of North America for at least the next ten days and beyond.
The U.S. 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. China saw the warmest autumn temperatures in 62 years, and Japan recorded the highest-ever temperature for November in records going back more than 200 years. AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
Lower-48 state dry gas production Tuesday was 105.1 bcf/day (+3.5% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 97.3 bcf/day (+4.6% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Tuesday were 14.0 bcf/day (+2.5% 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 94% full as of December 3, above the 5-year seasonal average of 84% full for this time of year. U.S. nat-gas inventories as of December 1 were +6.7% above their 5-year seasonal average.
An increase in U.S. electricity output is supportive for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended December 2 rose +3.7% y/y to 77,956 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending December 2 fell -0.7% y/y to 4,092,931 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended December 1 fell -117 bcf, more than expectations of a -109 bcf decline and a 5-year average draw of -48 bcf. As of December 1, nat-gas inventories were up +7.4% y/y and were +6.7% 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 December 8 rose +3 rigs to 119 rigs, just above the 19-month low of 113 rigs posted September 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.
