January Nymex natural gas (NGF24) on Wednesday closed up +0.024 (+1.04%).
Nat-gas prices Wednesday recovered from a 6-month low and moved higher as short-covering emerged after the dollar index fell to a 1-1/2 week low. Nat-gas prices have been under pressure over the past month as above-normal early winter U.S. temperatures have 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 Wednesday was 104.7 bcf/day (+3.6% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 97.2 bcf/day (+3.4% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 14.2 bcf/day (-4.0% 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 90% full as of December 11, above the 5-year seasonal average of 80% full for this time of year. U.S. nat-gas inventories as of December 1 were +6.7% above their 5-year seasonal average.
An increase in U.S. electricity output supports nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended December 9 rose +0.3% y/y to 75,237 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending December 9 fell -0.7% y/y to 4,093,153 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to fall -55 bcf, below the five-year average draw for this time of year of -81 bcf.
Last Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended December 1 fell -117 bcf, more than expectations of a -109 bcf decline and a 5-year average draw of -48 bcf. As of December 1, nat-gas inventories were up +7.4% y/y and were +6.7% 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 December 8 rose +3 rigs to 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.
