January Nymex natural gas (NGF24) on Wednesday closed down -0.045 (-1.81%).
Nat-gas prices on Wednesday closed moderately lower and came under pressure after midday weather forecasts shifted warmer for the northern half of the U.S., which will reduce heating demand for nat-gas. Forecaster Maxar Technologies said Wednesday that the northern tier of the U.S. is seeing widespread warmer forecasts from Dec 25-29. On Tuesday, the Commodity Weather Group said record-high temperatures could be seen in the Midwest during the Christmas holidays.
Last Wednesday, nat-gas prices tumbled to a 6-month low and have been under pressure over the past month as above-normal early winter U.S. temperatures curbed heating demand for nat-gas and kept supplies elevated. Forecaster Maxar Technologies said updated weather forecasts have trended warmer and that above-normal temperatures are expected for most of the U.S. into the end of the year.
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 Wedneday was 105.3 bcf/day (+5.0% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 93.3 bcf/day (-15.9% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 15.1 bcf/day (+3.5% 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 Wednesday that total U.S. electricity output in the week ended December 16 fell -0.4% y/y to 78,3197 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending December 16 fell -0.7% y/y to 4,092,819 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to fall to -82 bcf, a smaller decline than the five-year average for this time of year of -107 bcf.
Last Thursday's weekly EIA report was neutral to slightly bearish for nat-gas prices as nat-gas inventories for the week ended December 8 fell -55 bcf, right on expectations but below the 5-year average draw of -81 bcf. As of December 8, nat-gas inventories were up +7.4% y/y and were +7.6% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 89% full as of December 17, above the 5-year seasonal average of 77% 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 ended December 15 was unchanged at 119 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.
