December Nymex natural gas (NGZ24) on Thursday closed sharply higher by +0.146 (+4.57%)
Dec nat-gas prices Thursday extended this week's sharp rally to a 1-year nearest-futures high. An unexpected decline in weekly EIA nat-gas supplies was bullish for prices when the EIA reported nat-gas inventories the week ended November 15 fell -3 bcf when expectations were for an increase of +1 bcf. Also, the outlook for sharply colder temperatures toward the end of the month that will boost heating demand for nat-gas is pushing prices sharply higher. Forecaster Maxar Technologies said Thursday that forecasts shifted colder for much of the US for the December 1-5 period.
Nat-gas prices Thursday also had carryover support from a rally in European nat-gas prices to a 1-year high on an escalation of the Ukraine-Russia conflict after Russia launched long-range missiles into Ukraine. The US on Thursday also sanctioned Gazprombank, the last major Russian financial institution some central European countries use to pay for the gas they still buy from Russia, which increases the risk of a cut off of some of the remaining Russian natural gas flows to Europe.
Lower-48 state dry gas production Thursday was 101.5 bcf/day (-4.1% y/y), according to BNEF. Lower-48 state gas demand Thursday was 89.4 bcf/day (+6.8% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 13.4 bcf/day (-3.1% 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 Wednesday that total US (lower-48) electricity output in the week ended November 16 rose +2.06% y/y to 7,764 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 16 rose +1.8% y/y to 4,165,449 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb by +21 bcf the week ended November 15, well above the five-year average for a draw of -16 bcf for this time of year.
Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended November 15 unexpectedly fell -3 bcf versus expectations of +1 bcf , although better than the 5-year average build for this time of year of -16 bcf. As of November 15, nat-gas inventories were up +3.7% y/y and were +6.4% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 90% full as of November 19, slightly below the 5-year seasonal average of 91% 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 November 15 fell -1 rig to 101 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs. Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
