November Nymex natural gas (NGX23) on Monday closed +0.027 (+0.93%).
Nat-gas prices on Monday recovered from a 2-1/2 week low and closed moderately higher. A decline in the dollar to a 1-week low Monday sparked short covering in nat-gas futures. Nat-gas prices Monday initially moved lower on the outlook for warmer weather in much of the eastern U.S. and cooler weather in the western U.S., cutting nat-gas demand for heating and air conditioning.
Nat-gas prices have support from concern about global supplies after Chevron shut down a nat-gas production field in Israel 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 Monday was 103.6 bcf/day (+3.5% y/y), according to BNEF. Lower-48 state gas demand Monday was 72.8 bcf/day, +19.3% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals on Monday were 14.1 bcf/day or -3.3% w/w.
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 98% full as of October 16, above the 5-year seasonal average of 89% full for this time of year. U.S. nat-gas inventories as of October 13 were +5.1% 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 14 fell -1.8% y/y to 68,978 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending October 14 fell -0.5% y/y to 4,092,610 GWh.
Last Thursday's weekly EIA report of +97 bcf for the week ended October 13 was bearish for nat-gas prices since it was above expectations of +83 bcf and above the 5-year average for this time of year at +85 bcf. As of October 13, nat-gas inventories were up +8.5% y/y and were +5.1% 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 20 rose by +1 to 118 rigs, modestly above the 19-month low of 113 rigs from September 8. Active rigs rose to a 4-year high of 166 rigs in September 2022. Active rigs have roughly doubled from the 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.
