December Nymex natural gas (NGZ23) on Tuesday closed down -0.088 (-3.15%).
Nat-gas prices Tuesday extended Monday's losses to a 2-month nearest-futures low and settled sharply lower. Forecasts for warmer U.S. weather that curb heating demand for nat-gas are undercutting prices. Forecaster Atmospheric G2 said Tuesday that most U.S. weather forecasts were shifting warmer from Dec 8-12. Also, ramped-up U.S. nat-gas production is weighing on prices.
Lower-48 state dry gas production Tuesday was 104.2 bcf/day (+3.2% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 98.9 bcf/day (+22.6% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Tuesday were 13.8 bcf/day (-6.1% 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 97% full as of November 26, above the 5-year seasonal average of 86% full for this time of year. U.S. nat-gas inventories as of November 17 were +7.0% 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 November 18 fell -8.3% y/y to 70,318 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending November 18 fell -0.7% y/y to 4,091,924 GWh.
Last Wednesday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended November 17 unexpectedly fell -7 bcf versus expectations of a +3 bcf increase, although a smaller draw than the 5-year average of -53 bcf. As of November 17, nat-gas inventories were up +7.4% y/y and were +7.0% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Wednesday that the number of active U.S. nat-gas drilling rigs in the week ended November 24 rose +3 rigs to 117 rigs, just 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.
