Nat-Gas Slightly Lower on Ample U.S. Nat-Gas Inventories

April Nymex natural gas (NGJ23) on Thursday closed down -0.008 (-0.31%).

Apr nat-gas on Thursday posted modest losses.  A smaller-than-expected seasonal decline in EIA nat-gas inventories weighed on prices.  The EIA reported Thursday that nat-gas inventories fell -84 bcf, while close to expectations of a -82 bcf decline, were well below the 5-year average decline for this time of year at -101 bcf.  Losses in nat-gas prices were limited after forecaster Atmospheric G2 said colder-than-average weather is expected over a large portion of the Lower 48 states over the next ten days.

Lower-48 state dry gas production on Thursday was 99.7 bcf (+6.3% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Thursday was 87.4 bcf/day, down -6.6% y/y, according to BNEF.  On Thursday, LNG net flows to U.S. LNG export terminals were 12.9 bcf, down -3.4% 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 59% full as of Mar 6, far above the 5-year seasonal average of 37%.  Also, U.S. nat-gas inventories were +21.5% above their 5-year average as of Mar 3, the most in 6-1/2 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.

Thursday's weekly EIA report was neutral to bearish for nat-gas prices since it showed U.S. nat gas inventories fell -84 bcf, more than expectations of -82, but a much smaller draw than the 5-year average draw of -101 bcf for this time of year.  Nat-gas inventories are now +21.5% above their 5-year seasonal average, the most in 6-1/2  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 Pushes Higher on a Weaker Dollar
• Nat-Gas Sinks on Weakness in U.S. LNG Exports
• Crude Declines on Concern a Hawkish Fed Will Curb Energy Demand
• Nat-Gas Rallies on the Outlook for Colder U.S. Temps