March Nymex natural gas (NGH24) on Wednesday closed +0.023 (+1.11%).
Nat-gas prices Wednesday recovered from an 8-3/4 month nearest-futures low and posted moderate gains. Â Fund buying emerged in nat-gas futures near psychological support at $2/mmbtu, which sparked short covering and pushed prices higher. Â Nat-gas prices have sold off sharply over the past three weeks as unseasonably warm U.S. temperatures have reduced heating demand for nat-gas. Â Also, an extended outage at an LNG export terminal in Texas threatens to limit U.S. nat-gas exports and boost domestic supplies. Â NatGasWeather said Wednesday that high pressure will bring warmer-than-normal temperatures for the eastern half of the U.S. from February 7 to 11.
Nat-gas prices are under pressure after the Freeport LNG nat-gas export terminal in Texas announced last Friday that it is shutting one of its three production units for a month for repairs after extreme cold in Texas damaged equipment. Â The closure of one of the units will limit U.S. nat-gas exports and increase U.S. nat-gas supplies.
Lower-48 state dry gas production Wednesday was 104.3 bcf/day (+8.7% y/y), according to BNEF. Â Lower-48 state gas demand Wednesday was 94.4 bcf/day (-20.9% y/y), according to BNEF. Â LNG net flows to U.S. LNG export terminals Tuesday were 14.1 bcf/day (+6.8% w/w), according to BNEF.
The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices. Â AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
An increase in U.S. electricity output is positive for nat-gas demand from utility providers. Â The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended January 27 rose +1.0% y/y to 80,177 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 27 fell -0.3% y/y to 4,105,901 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will fall by -201 bcf, a biigger decline than the 5-year average for this time of year of -185 bcf.
Last Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended January 19 fell -326 bcf, a larger draw than expectations of -318 bcf and well above the 5-year average draw of -148 bcf. Â As of January 19, nat-gas inventories were up +4.5% y/y and were +5.2% above their 5-year seasonal average, signaling ample nat-gas supplies. Â In Europe, gas storage was 71% full as of January 29, above the 5-year seasonal average of 58% full for this time of year.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ending January 26 fell -1 rig to 119 rigs, just above the 2-year low of 113 rigs posted September 8. Â Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
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More Natural Gas News from Barchart
- Nat-Gas Prices Recover on Fund Buying Near Major Price Support
- Nat-Gas Prices Settle Higher as U.S. Forecasts Turn Colder
- Nat-Gas Prices Give Up Early Gains on Forecasts for Warm U.S. Temps
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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