April Nymex natural gas (NGJ24) on Friday closed down sharpy by -0.086 (-4.94%).
Nat-gas prices Friday retreated on the prospects for warm early spring temperatures, which will curb heating demand for nat-gas and keep inventories elevated. Maxar Technologies on Friday said that forecasts have shifted warmer for much of the eastern US from March 25-29.
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. However, Freeport said Friday that once the production unit is reopened, the other two units will be taken down for maintenance, and all three units will not be back online until May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.
Lower-48 state dry gas production Friday was 99.8 bcf/day (+0.6% y/y), according to BNEF. Lower-48 state gas demand Friday was 72.3 bcf/day (-15.8% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 12.9 bcf/day (-3.4% w/w), according to BNEF.
A decrease in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total US electricity output in the week ended March 9 fell -2.8% y/y to 71,741 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending March 9 was unchanged y/y at 4,100,233 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 60% full as of March 13, above the 5-year seasonal average of 43% full for this time of year.
Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending March 15 rose by +1 rig to 116 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.
