April Nymex natural gas (NGJ24) on Wednesday closed down by -0.045 (-2.58%).
Nat-gas prices Wednesday posted moderate losses as US weather forecasts shifted warmer, potentially curbing heating demand for nat-gas. Maxar Technologies said Wednesday that forecasts have trended warmer for much of the eastern half of the US "with a round of above-normal temperatures" for March 30-April 3.
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 reopened partially last week. However, Freeport said last Friday that once the production unit is fully 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 Wednesday was 99.7 bcf/day (+0.3% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 82.9 bcf/day (-6.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 13.5 bcf/day (+3.7% 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 16 fell -5.45% y/y to 70,442 GWh (gigawatt hours), and cumulative US electricity output in the 52-week period ending March 16 fell -0.24% y/y to 4,096,176 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories are expected to climb by +6 bcf, well above the five-year average for this time of year of a draw of -42 bcf.
Last 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 18, above the 5-year seasonal average of 42% 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 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.
