Nat-Gas Sinks on Weakness in U.S. LNG Exports

April Nymex natural gas (NGJ23) on Wednesday closed down -0.136 (-5.06%).

Apr nat-gas Wednesday closed sharply lower.  Weaker demand from LNG export terminals along the Gulf Coast weighed on nat-gas prices.  BNEF data shows that estimated gas flows to U.S. LNG export terminals Wednesday was 12.1 bcf, down -7.6% w/w.  Reduced U.S. LNG exports will allow for the expansion of U.S. nat-gas inventories, a negative price factor.  The slump in European nat-gas prices this week to a 1-1/2 year low is curbing European demand for U.S. nat-gas supplies.

Lower-48 state dry gas production on Wednesday was 98.4 bcf (+5.4% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Wednesday was 87.8 bcf/day, down -4.4% y/y, according to BNEF.  On Wednesday, LNG net flows to U.S. LNG export terminals were 12.1 bcf, down -7.6% 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 59% full as of Mar 6, far above the 5-year seasonal average of 37%.  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.

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 Mar 4 rose +0.6% y/y to 74,916 GWh (gigawatt hours).  Also, cumulative U.S. electricity output in the 52-week period ending Mar 4 rose +1.3% y/y to 4,103,582 GWh.

The consensus is for Thursday's weekly EIA nat-gas inventories to fall by -83 bcf.

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).

• Crude Declines on Concern a Hawkish Fed Will Curb Energy Demand
• Nat-Gas Rallies on the Outlook for Colder U.S. Temps
• Crude Sinks on Dollar Strength and Interest Rate Concerns
• Nat-Gas Prices Plunge as Warm U.S. Temps Curb Nat-Gas Heating Demand