Feb Nymex natural gas (NGG23) on Wednesday closed down -0.191 (-5.86%).
Feb nat-gas Wednesday tumbled to a new 19-month nearest-futures low and settled sharply lower. Â Gas prices fell after Wednesday's weather forecasts shifted slightly warmer in the East and less-cold in the Rockies, which would reduce heating demand for nat-gas. Â Also, EBW Analytics Group said in a note to clients Wednesday that nat-gas prices are facing "extended downside risks over the next 30-45 days" due to a combination of strong production, constrained export demand because of the Freeport LNG terminal shutdown, growing inventory surpluses, and mild winter temperatures.
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 warm temperatures this winter have caused rising nat-gas inventories in Europe and the U.S., with gas storage across Europe currently 78% full as of last Thursday, far above the 5-year average for this time of year of 58%.
A negative factor for nat-gas prices is the continued closure of the Freeport LNG export terminal. Â On Jan 12, 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 Wednesday was 100.3 bcf (+6.1% y/y), modestly below the record high of 103.6 bcf posted on Oct 3, according to BNEF. Â Lower-48 state gas demand Wednesday was 96.3 bcf/day, down by -12.4% y/y, according to BNEF. Â LNG net flow to U.S. LNG export terminals Wednesday was 12.8 bcf/day, up +5.5% w/w.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. Â The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Jan 21 fell -9.7% y/y to 76,887 GWh (gigawatt hours). Â However, cumulative U.S. electricity output in the 52-week period ending Jan 21 rose +1.9% y/y to 4,121,985 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.
The consensus is for Thursday's weekly EIA nat-gas inventories to fall by -84 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories fell -82 bcf, more than expectations of -76 bcf but much less than the 5-year average for this time of year of -156 bcf. Â Nat-gas inventories are +1.2% above 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 20 rose by +6 to 156 rigs, 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 Pushes Higher on Smaller EIA Inventory Build
- Nat-Gas Prices Retreat on Abundant U.S. Supplies
- Crude Prices Fall as Weak Stocks Prompt Risk Aversion
- Nat-Gas Prices Sharply Higher 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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