Feb Nymex natural gas (NGG23) on Tuesday closed up +0.167 (+4.88%).
Feb nat-gas Tuesday rallied sharply as forecasts for widespread cold in the U.S. are expected to boost heating demand for nat-gas later this month. Â Forecaster Atmospheric G2 said Tuesday that a pattern change would emerge next week that will lead to significantly colder weather in the U.S., with below-normal temperatures seen across the northern and western U.S. beginning Jan 27.
Last Friday, nat-gas prices sank to a 1-1/2 year nearest-futures low. Â Nat-gas prices have fallen sharply over the past month as abnormally mild weather across the northern hemisphere erodes heating demand for nat-gas. Â The National Oceanic and Atmospheric Administration (NOAA) expects above-normal temperatures for most of Europe and the U.S. through the end of this month. Â The warm temperatures this winter have caused rising European nat-gas inventories, with gas storage across Europe currently 82% full as of last Thursday, far above the 5-year average for this time of year of 70%.
A negative factor for nat-gas prices is the continued closure of the Freeport LNG export terminal. Â Last Thursday, the Rapidian Energy Group said that the Freeport LNG export terminal, closed since an explosion on June 8, will likely be offline "for several more months." Â The report cited the delay in the "extensive personnel training" that is being required by federal regulators overseeing the restart of the terminal. Â 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. Â 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 Tuesday was 101.4 bcf (+8.4% y/y), modestly below the record high of 103.6 bcf posted on Oct 3, according to BNEF. Â Lower-48 state gas demand Tuesday was 85.4 bcf/day, down by -17.8% y/y, according to BNEF. Â LNG net flow to U.S. LNG export terminals Tuesday was 12.2 bcf/day, up +0.8% w/w.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. Â The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended Jan 7 fell -11.3% y/y to 73,106 GWh (gigawatt hours). Â However, cumulative U.S. electricity output in the 52-week period ending Jan 7 rose +2.4% y/y to 4,133,554 GWh.
Nat-gas prices have support as EU countries agreed to cut nat-gas demand from Russia by 15% by early 2023. Â 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 unexpectedly rose +11 bcf in the week ended Jan 6 versus expectations of a draw of -12 bcf. Â The increase in nat-gas supplies is the first increase ever for this time of year. Â Nat-gas inventories are -1.4% 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 13 fell by -2 to 150 rigs, an 8-month low and moderately below the 3-1/4 year high of 166 rigs posted in the week ended Sep 9. Â Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).
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More Natural Gas News from Barchart
- Crude Climbs on Stronger-Than-Expected Chinese Economic News
- Nat-Gas Prices Sink on Above-Normal Winter Temps
- Crude Prices Underpinned on the Outlook for Stronger Chinese Oil Demand
- Nat-Gas Prices Gain on Forecasts for Colder U.S. Temps
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.
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