Nat-Gas Prices Sharply Lower as Risk Assets Decline

April Nymex natural gas (NGJ23) on Wednesday closed down -0.134 (-5.21%).

Apr nat-gas on Wednesday sold off sharply as concerns about the health of the global financial sector sparked a plunge in risk assets, including nat-gas.  Also, the market's fundamentals remain weak with burgeoning U.S. nat-gas supplies as U.S. nat-gas inventories are +21.5% above their 5-year average, the most in 6-1/2 years.

Lower-48 state dry gas production on Wednesday was 98.5 bcf (+5.2% 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 87.3 bcf/day, up +24.6% y/y, according to BNEF.  On Wednesday, LNG net flows to U.S. LNG export terminals were 13.6 bcf, up +11.3% w/w.  On Mar 3, 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 56% full as of Mar 13, far above the 5-year seasonal average of 36% for this time of year.  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.

A decline in U.S. electricity output is bearish for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Mar 11 fell -1.7% y/y to 73,813 GWh (gigawatt hours).  However, cumulative U.S. electricity output in the 52-week period ending Mar 11 rose +1.1% y/y to 4,102,283 GWh.

The consensus is for Thursday's weekly EIA nat-gas inventories to fall -62 bcf.

Last 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 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).

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