Short Covering Boosts Nat-Gas Prices as European Gas Prices Surge

December Nymex natural gas (NGZ24) on Friday closed higher by +0.038 (+1.36%)

Dec nat-gas prices Friday recovered from early losses and settled moderately higher.  Short covering in nat-gas futures emerged Friday when European gas prices rallied sharply to an 11-1/2 month high.  Nat-gas prices Friday initially moved lower on the outlook for warmer US weather, which will reduce heating demand for nat-gas.  Forecaster Maxar Technologies said Friday that forecasts shifted warmer across the country's eastern half for the November 25-29 period.  

Lower-48 state dry gas production Friday was 102.4 bcf/day (-2.1% y/y), according to BNEF.  Lower-48 state gas demand Friday was 78.4 bcf/day (-3.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Friday were 13.9 bcf/day (+4.9% 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 9 rose +3.19% y/y to 73,297 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 9 rose +1.6% y/y to 4,164,003 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended November 8 rose +42 bcf, above expectations of +39 bcf and well above the 5-year average build for this time of year of +29 bcf.  As of November 8, nat-gas inventories were up +3.7% y/y and were +6.1% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 93% full as of November 10, slightly above the 5-year seasonal average of 92% full for this time of year.

Baker Hughes reported 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). 

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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.