February Nymex natural gas (NGG24) on Thursday closed +0.153 (+5.73%).
Nat-gas prices on Thursday extended this week's rally to a 6-week high. A change in U.S. weather patterns to colder temperatures will boost heating demand for nat-gas and is fueling short-covering in nat-gas futures. Forecaster Atmospheric G2 said the northwestern part of the U.S. and Plains are seeing temperatures shift colder from Jan 9-13, and over the next two weeks and beyond, a weather pattern change will begin to unfold that will result in a "significant Arctic cold shot" in the U.S.
Nat-gas rallied Thursday despite a smaller-than-expected draw in weekly supplies after the EIA reported nat-gas inventories fell -14 bcf last week, a smaller draw than expectations of -32 bcf.
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. 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 Thursday was 103.4 bcf/day (+2.3% y/y), according to BNEF. Lower-48 state gas demand Thursday was 102.3 bcf/day (+24.1% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Thursday were 15.0 bcf/day (+5.2% w/w), according to BNEF.
A decline in U.S. electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total U.S. electricity output in the week ended December 30 fell -7.7% y/y to 73,731 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending December 30 fell -1.6% y/y to 4,076,145 GWh.
Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended December 29 fell -14 bcf, a smaller draw than expectations of -32 bcf and well above the 5-year average draw of -97 bcf. As of December 29, nat-gas inventories were up +20.2% y/y and were +13.0% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 86% full as of January 2, above the 5-year seasonal average of 74% full for this time of year.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ending December 29 was unchanged at 120 rigs, just above the 19-month low of 113 rigs posted September 8. Active rigs have fallen back since 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.
