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Nat-Gas Prices Weighed Down by Abundant Inventories and Warm U.S. Temps

Barchart - Mon Nov 20, 2:20PM CST

December Nymex natural gas (NGZ23) on Monday closed down -0.078 (-2.64%).

Nat-gas prices Monday tumbled to a 4-week low and settled moderately lower.  Ample supplies and warm U.S. temperatures are weighing on nat-gas prices.  Domestic U.S. gas inventories totaled 3.833 tcf as of November 10, +5.6% above their five-year average.

Monday's updated U.S. weather forecast is slightly warmer than last Friday's forecast and is undercutting nat-gas prices because warmer temperatures will reduce heating demand for nat-gas.  Forecaster Atmospheric G2 said temperatures across the northern and eastern U.S. from Nov 25-29 will be warmer than previously expected.  

Lower-48 state dry gas production Monday was 105.9 bcf/day (+6.5% y/y), according to BNEF.  Lower-48 state gas demand Monday was 81.4 bcf/day (-20.4% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Monday were 14.4 bcf/day (+13.4% w/w), according to BNEF.

High inventories caused by carryover from the mild 2022/23 winter and weak heating demand have undercut nat-gas prices.  Gas storage across Europe was 99% full as of November 13, above the 5-year seasonal average of 89% full for this time of year.  U.S. nat-gas inventories as of November 10 were +5.6% above their 5-year seasonal average.

An increase in U.S. electricity output is bullish for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended November 11 rose +0.5% y/y to 71,033 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending November 11 fell -0.4% y/y to 4,098,249 GWh.

The EIA reported Thursday that nat-gas inventories for the week ended November 10 showed an increase of +60 bcf, above the consensus of +42 bcf and well above the 5-year average of +20 bcf.  As of November 10, nat-gas inventories were up +5.2% y/y and were +5.6% above their 5-year seasonal average, signaling ample nat-gas supplies.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended November 17 fell -4 rigs to 114 rigs, just above the 19-month low of 113 rigs posted September 8.  Active rigs this year have fallen back after climbing to a 4-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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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.