Feb Nymex natural gas (NGG23) on Monday closed up +0.200 (+5.39%).
Feb nat-gas Monday rallied as a sell-off in the dollar index to a 7-month low sparked short-covering in nat-gas futures. Nat-gas prices last Friday sank to a 1-1/2 year low as above-average temperatures in the U.S. are sharply reducing heating demand for nat-gas. Forecaster Atmospheric G2 said Monday that temperatures across most of the U.S. will be above-normal through at least Jan 23.
A negative factor for nat-gas prices is the continued closure of the Freeport LNG export terminal. Last Thursday, the Rapidian Energy Group said that the Freeport LNG export terminal, which has been closed since an explosion on June 8, will likely be offline "for several more months." The report cited the delay in the "extensive personnel training" that is being required by federal regulators overseeing the restart of the terminal. 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 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.
The National Oceanic and Atmospheric Administration (NOAA) expects above-normal temperatures for most of Europe and the U.S. through mid-January. The warm temperatures this winter have caused rising European nat-gas inventories, with gas storage across Europe currently 84% full, far above the 5-year average for this time of year of 70%.
Lower-48 state dry gas production on Monday was 101.1 bcf (+6.6% y/y), modestly below the record high of 103.6 bcf posted on Oct 3, according to BNEF. Lower-48 state gas demand Monday was 9.8 bcf/day, down by -3.9% y/y, according to BNEF. LNG net flow to U.S. LNG export terminals Monday was 12.5 bcf/day, up +8.0% w/w.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported last Thursday that total U.S. electricity output in the week ended Dec 31 rose +9.8% y/y to 79,495 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending Dec 31 rose +2.8% y/y to 4,142,901 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.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories fell -221 bcf in the week ended Dec 30, a smaller decline than expectations of -240 bcf. Nat-gas inventories are -5.7% 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 Jan 6 fell by -4 to 152 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).
More Natural Gas News from Barchart
- Crude Rallies on Dollar Weakness and Chinese Fuel Demand Optimism
- Nat-Gas Prices Remain Under Pressure From Warm Temps
- Crude Climbs on Dollar Weakness and Strong Stocks
- Nat-Gas Prices Sink on Bearish EIA Report and Delay in Reopening Freeport
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.
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