Nat-Gas Prices Push Higher on a Bullish Weekly Storage Report

January Nymex natural gas (NGF25) on Thursday closed higher by +0.077 (+2.28%)

Jan nat-gas prices on Thursday rallied for a second session and posted a 2-1/2 week high.   A larger-than-expected draw in weekly nat-gas supplies Thursday propelled prices higher after the EIA reported nat-gas inventories for the week ended December 6 fell -190 bcf, a bigger draw than expectations of -168 bcf.  Also, the outlook for colder US temperatures to boost heating demand for nat-gas is boosting prices after the Commodity Weather Group said forecasts shifted colder for the eastern half of the US for December 17-21.

Lower-48 state dry gas production Thursday was 104.9 bcf/day (-0.5% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 112.5 bcf/day (+11% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 13.6 bcf/day (-4.4% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total US (lower-48) electricity output in the week ended December 7 rose +10.87% y/y to 83,412 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 7 rose +1.96% y/y to 4,173,295 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended December 6 fell -190 bcf versus expectations of -168 bcf and a much larger draw than the 5-year average draw for this time of year of -71 bcf.  As of December 6, nat-gas inventories were up +2.3% y/y and were +4.6% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 81% full as of December 10, below the 5-year seasonal average of 83% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending December 6 rose +2 rigs to 102 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).