Nat-Gas Prices Tumble as U.S. Nat-Gas Inventories Climb

Jan Nymex natural gas (NGF23) on Thursday closed down by -0.333 (-6.25%).

Jan nat-gas Thursday plunged to a 2-month nearest-futures low after weekly EIA nat-gas inventories fell -87 bcf, less than expectations of -92 bcf.  Nat-gas inventories are now +0.7% above their 5-year seasonal average, the first time in more than 11 months that inventories have climbed above the 5-year average.

Nat-gas prices also saw downward pressure Thursday from the outlook for milder-than-usual temperatures in the U.S. next week.  The Commodity Weather Group said above-normal temperatures are expected across the U.S. from Dec 29-Jan 2.  

Lower-48 state dry gas production on Thursday was 95.7 bcf (-0.5% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Thursday was 106.9 bcf/day, up +10.4% y/y, according to BNEF.  On Thursday, LNG net flow to U.S. LNG export terminals was 12.9 bcf/day, down -0.9% w/w.

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 Dec 17 rose +3.5% y/y to 78,653 GWh (gigawatt hours).  Also, cumulative U.S. electricity output in the 52-week period ending Dec 17 rose +2.2% y/y to 4,123,236 GWh.

In a bearish factor, the Freeport LNG export terminal said on Dec 2 that it expects to restart its facility around year-end, a further delay from its previous indication of a mid-December restart.  The closure of the facility has been bearish for nat-gas prices since the reduction in LNG exports has boosted U.S. nat-gas inventories.  The facility has been closed since an explosion on Jun 8.  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.

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.

Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories fell -87 bcf in the week ended Dec 16, a smaller decline than expectations of -92 bcf.  Inventories have recovered and are now +0.7% above their 5-year seasonal average, the first time in more than 11 months that nat-gas inventories have risen above the 5-year average.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended Dec 16 rose by +1 to 154 rigs, moderately 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).
 

• Crude Falls on Dollar Strength and Chinese Energy Demand Concerns
• Nat-Gas Slightly Higher as Arctic Cold Engulfs the U.S.
• Crude Gains on a Bigger-Than-Expected Drop in EIA Crude Inventories
• Nat-Gas Closes Sharply Lower on Expectations for Milder U.S. Temps