December Nymex natural gas (NGZ23) on Tuesday closed down -0.124 (-3.80%).
Nat-gas prices Tuesday fell sharply for the second straight day and posted a 2-week low. Warmer than normal U.S. temperatures are reducing heating demand for nat gas and are weighing on prices. The Commodity Weather Group Tuesday said widespread above-normal temperatures are seen in the central U.S. and South through Nov 16, with warmer temperatures spreading to the East Nov 17-21.
Lower-48 state dry gas production Tuesday was 103.6 bcf/day (+4.3% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 74.4 bcf/day (-0.5% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Tuesday were 13.3 bcf/day (-7.7% 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 100% full as of November 6, above the 5-year seasonal average of 91% full for this time of year. U.S. nat-gas inventories as of October 27 were +5.7% above their 5-year seasonal average.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended October 28 rose +3.6% y/y to 71,340 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending October 28 fell -0.5% y/y to 4,094,392 GWh.
Last Thursday's EIA nat-gas inventories report for the week ended October 27 showed an increase of +79 bcf, which was right on the consensus of +79 bcf but above the 5-year average of +57 bcf. As of October 27, nat-gas inventories were up +7.9% y/y and were +5.7% 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 Nov 3 rose by +1 rig to 118 rigs, modestly 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.
