January Nymex natural gas (NGF24) on Wednesday closed +0.069 (+2.71%).
Nat-gas prices on Wednesday rallied to a 3-week high and closed moderately higher. Fund short covering propelled nat-gas prices higher ahead of Wednesday's January Nymex nat-has futures contract expiration. Also, the outlook for colder U.S. temperatures that will boost heating demand for nat-gas pushed prices higher after forecaster Maxar Technologies said forecasts for Jan 1-Jan 5 show colder trends in the southern U.S.
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 104.5 bcf/day (+16.2% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 86.9 bcf/day (-13.5% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 13.8 bcf/day (+2.2% w/w), according to BNEF.
A decline in U.S. electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended December 16 fell -0.4% y/y to 78,3197 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending December 16 fell -0.7% y/y to 4,092,819 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to fall by -78 bcf.
Last Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended December 15 fell -87 bcf, a larger draw than expectations of -82 bcf but less than the 5-year average draw of -107 bcf. As of December 15, nat-gas inventories were up +7.6% y/y and were +8.5% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 87% full as of December 25, above the 5-year seasonal average of 75% full for this time of year.
Baker Hughes reported last Thursday that the number of active U.S. nat-gas drilling rigs in the week ended December 22 rose +1 to 120 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.
