April Nymex natural gas (NGJ24) on Thursday closed up +0.083 (+5.01%), breaking a string of six consecutive sessions of losses.
Nat-gas prices on Thursday rallied after the EIA weekly report showed that US gas inventories fell by -9 bcf, a larger drawdown than market expectations of -2 bcf. Nat-gas prices also saw support from short-covering after recent losses, and cooler weather forecasts. NatGasWeather forecasted that the northern third of the US will have mild to cool weather for March 21-28.
Nat-gas prices have collapsed this year and plunged to a 3-1/2 year nearest-futures low (H24) in late-February as an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average. The US 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.
Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas. The unit is scheduled to reopen this week. The unit's closure limited US nat-gas exports and boosted US nat-gas inventories.
Lower-48 state dry gas production Thursday was 100.6 bcf/day (+1.5% y/y), according to BNEF. Lower-48 state gas demand Thursday was 72.3 bcf/day (-25.0% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 12.3 bcf/day (-8.7% 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 last Wednesday that total US electricity output in the week ended March 2 rose +0.4% y/y to 75,244 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending March 2 was unchanged y/y at 4,102,305 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended March 8 fell by -9 bcf, more than expectations of -2 bcf, although the -9 bcf decline was much smaller than the 5-year average decline of -87 bcf for this time of year. As of March 8, nat-gas inventories were up +17.9% y/y and were +37.1% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 62% full as of March 4, above the 5-year seasonal average of 45% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending March 8 fell by -4 rigs to 115 rigs, just above the 2-year low of 113 rigs posted September 8. Active rigs have fallen back since climbing to a 4-1/2 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.
