Nat-Gas Pushes Higher on a Smaller Build of Weekly Supplies and Cold U.S. Temps

Dec Nymex natural gas (NGZ22) on Thursday closed up +0.169 (+2.73%).

Dec nat-gas Thursday posted moderate gains.  Nat-gas prices rose Thursday after weekly EIA inventories rose less than expected.  The EIA reported that nat-gas inventories rose +64 bcf last week, below expectations of +66 bcf.  Also, updated U.S. weather forecasts have shifted "significantly colder," which will boost heating demand for nat-gas.  Forecaster Atmospheric G2 said temperatures are expected to be well below normal over the eastern half of the U.S. from Nov 21-26.

A bearish factor for U.S. nat-gas prices is the concern that a further delay of the restart of the Freeport LNG export terminal will lead to an increase in U.S. nat-gas inventories.  The Freeport LNG export terminal said Monday it would take longer than expected to reopen following an explosion on Jun 8.  The export facility said Monday it may need to remain closed through December to finish all repairs to the terminal, later than its earlier prediction of Nov 21.  The Freeport terminal normally accounts for about 20% of all U.S. nat-gas exports and receives about 2 bcf, or 2.5%, of the output from the lower 48 U.S. states.

Lower-48 state dry gas production on Thursday was 99.2 bcf (+4.3% y/y), mildly below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Current below-normal temperatures have boosted heating demand for nat-gas as lower-48 state total gas demand Thursday was 97.3 bcf/day, up +32.1% y/y and the most eight months, according to BNEF.  LNG net flow to U.S. LNG export terminals Thursday was 12.5 bcf/day, up +13.3% w/w, according to BNEF.

An increase in U.S. electricity output is bullish for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Nov 12 rose +1.7% y/y to 70,667 GWh (gigawatt hours).  Also, cumulative U.S. electricity output in the 52-week period ending Nov 12 rose +2.1% y/y to 4,114,661 GWh.

Nat-gas prices have support as EU countries agreed to cut nat-gas demand from Russia by 15% by early 2023.  Also, Russia recently slashed nat-gas exports to Europe to 20% of capacity, putting upward pressure on European nat-gas prices.  Russia has already halted nat-gas shipments to Demark, Finland, Bulgaria, Netherlands, Poland, and Latvia and reduced supplies to Germany for not acceding to its demand for gas payments in Russian rubles.

Thursday's weekly EIA report was bullish for nat-gas prices since it showed U.S. nat gas inventories rose +64 bcf in the week ended Nov 11, below expectations of +66 bcf, although well above the 5-year seasonal average gain of +5 bcf.  Inventories have recovered and are now only -0.2% below their 5-year seasonal average.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended Nov 11 was unchanged at 155 rigs, which was below the 3-1/4 year high of 166 rigs posted in the week ended Sep 9.  Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).
 

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