January Nymex natural gas (NGF25) on Friday closed higher by +0.080 (+2.83%)
Jan nat-gas prices Friday recovered from a 1-week low and closed moderately higher on expectations for Arctic air to move into the lower 48 US states, stoking heating demand for nat-gas. On Friday, the Commodity Weather Group forecasted below-normal temperatures for the eastern US for the latter half of next week, with a second potential cold front the following week.
Nat-gas price Friday initially extended Wednesday's losses to a 1-week low after the weekly EIA inventory report showed nat-gas inventories fell by -2 bcf, a smaller draw than expectations of -3 bcf, putting nat-gas inventories +7.2% above their 5-year seasonal average for this time of year, signaling ample nat-gas supplies.
Nat-gas prices rallied sharply last week to a 1-year high last Friday on carryover support from a rally in European nat-gas prices to a 1-year high. Escalation of the Ukraine-Russia conflict lifted European gas prices after Russia launched a hypersonic missile into Ukraine. Also, the US last Thursday 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 104.5 bcf/day (+0.3% y/y), according to BNEF. Lower-48 state gas demand Friday was 96.3 bcf/day (-6.9% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 14.1 bcf/day (+4.5% 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 23 rose +3.86% y/y to 73,873 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 23 rose +1.91% y/y to 4,168,195 GWh.
Wednesday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended November 22 fell -2 bcf versus expectations of -3 bcf and well above the 5-year average draw for this time of year of -30 bcf. As of November 22, nat-gas inventories were up +3.4% y/y and were +7.2% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 87% full as of November 25, below the 5-year seasonal average of 89% full for this time of year.
Baker Hughes reported Wednesday that the number of active US nat-gas drilling rigs in the week ending November 29 rose +1 rig to 100 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).
