December Nymex natural gas (NGZ23) on Monday closed down -0.251 (-7.14%).
Nat-gas prices Monday sold off sharply and posted a 2-week low. Warmer than normal U.S. temperatures are reducing heating demand for nat gas and are weighing on prices. Forecaster Maxar Technologies said weather forecasts are trending warmer east of the Rocky Mountains due to a lack of an Arctic blocking pattern, and temperatures will be above normal from Nov 11-15.
Lower-48 state dry gas production Monday was 104.2 bcf/day (+5.1% y/y), according to BNEF. Lower-48 state gas demand Monday was 74.4 bcf/day (+11.8% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Monday were 14.0 bcf/day (+1.7% 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 27 were +5.7% above their 5-year seasonal average.
An increase in U.S. electricity output is bullish 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 28 rose +3.6% y/y to 71,340 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending October 28 fell -0.5% y/y to 4,094,392 GWh.
Last Thursday's EIA nat-gas inventories report for the week ended October 27 showed an increase of +79 bcf, which was right on the consensus of +79 bcf but above the 5-year average of +57 bcf. As of October 27, nat-gas inventories were up +7.9% y/y and were +5.7% 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 Nov 3 rose by +1 rig to 118 rigs, modestly 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.
