Nat-Gas Tumbles on Warmer U.S. Temps and Robust U.S. Nat-Gas Inventories

April Nymex natural gas (NGJ23) on Friday closed down -0.113 (-4.44%).

Apr nat-gas Friday fell to a 2-week low and closed sharply lower after U.S. weather forecasts shifted warmer, which would reduce heating demand for nat-gas.   Also, ample U.S. supplies are weighing on prices after Thursday’s weekly EIA report showed U.S. nat-gas inventories are +21.5% above their 5-year seasonal average, the highest in 6-1/2 years.  

Lower-48 state dry gas production on Friday was 99.9 bcf (+6.9% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Friday was 86.8 bcf/day, down -6.4% y/y, according to BNEF.  On Friday, LNG net flows to U.S. LNG export terminals were 13.2 bcf, down -3.1% 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 Friday that the number of active U.S. nat-gas drilling rigs in the week ended Mar 10 fell -1 to 153 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 Oil Rebounds as Interest Rate Concerns Ease
• Nat-Gas Slightly Lower on Ample U.S. Nat-Gas Inventories
• Crude Pushes Higher on a Weaker Dollar
• Nat-Gas Sinks on Weakness in U.S. LNG Exports