December Nymex natural gas (NGZ24) on Friday closed sharply lower by -0.210 (-6.29%)
Dec nat-gas prices Friday retreated from a 1-year nearest-futures high and settled sharply lower. The shift in US weather forecasts on Friday to warmer from below-normal will reduce heating demand for gas and also sparked long liquidation in nat-gas futures. On Friday, the Commodity Weather Group said forecasts turned warmer for the west and central parts of the US from December 2-6.
Nat-gas prices have rallied sharply this week on carryover support from a rally in European nat-gas prices to a 1-year high on an escalation of the Ukraine-Russia conflict after Russia launched a hypersonic missile into Ukraine. The US on Thursday also 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 Friday was 103.0 bcf/day (-2.1% y/y), according to BNEF. Lower-48 state gas demand Friday was 87.7 bcf/day (+4.9% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 14.2 bcf/day (+6.2% 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 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.
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 better than the 5-year average build 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 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).
