Nat-Gas Prices Plunge as Warm U.S. Temps Curb Nat-Gas Heating Demand

April Nymex natural gas (NGJ23) on Monday closed down -0.437 (-14.52%).

Apr nat-gas Monday plunged to a 1-week low and closed sharply lower as U.S. weather forecasts shifted to milder, which will curb heating demand for nat-gas.  Forecaster Atmospheric G2 said temperatures across much of the U.S. are looking warmer for the five days starting Mar 11 than they did last Friday.  U.S. nat-gas prices are also under pressure on negative carryover from Monday’s decline in European nat-gas prices to a 1-1/2 year low.

Lower-48 state dry gas production on Monday was 99.3 bcf (+4.9% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Monday was 79.9 bcf/day, up +14% y/y, according to BNEF.  On Monday, LNG net flows to U.S. LNG export terminals were 13.6 bcf, up +11.4% w/w.  Last Friday, LNG net flows to U.S. LNG export terminals rose to a record 14.1 bcf/day as nat-gas exports restarted from the Freeport LNG terminal as the terminal was reopened after being closed since last June because of an explosion.

Nat-gas prices have fallen sharply over the past three months and posted a 2-1/4 year nearest-futures low on Feb 22 as normally mild weather across the northern hemisphere erodes heating demand for nat-gas.  January was the sixth-warmest across the contiguous 48 U.S. states in data from 1895.  This winter's warm temperatures have caused rising nat-gas inventories in Europe and the U.S.  Gas storage across Europe was currently 61% full as of Feb 28, far above the 5-year seasonal average of 40%.  Also, U.S. nat-gas inventories were +19.3% above their 5-year average as of Feb 24, the most in 2-3/4 years.

A decline in U.S. electricity output is bearish for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended Feb 25 fell -6.0% y/y to 74,362 GWh (gigawatt hours).  However, cumulative U.S. electricity output in the 52-week period ending Feb 25 rose +1.3% y/y to 4,103,105 GWh.

Last Thursday's weekly EIA report was mixed for nat-gas prices since it showed U.S. nat gas inventories fell -81 bcf, more than expectations of -75, but a much smaller draw than the 5-year average draw of -134 bcf for this time of year.  Nat-gas inventories are now +19.3% above their 5-year seasonal average, the most in 2-3/4  years.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended Mar 3 rose +3 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).

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