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Nat-Gas Prices Fall as Warm U.S. Temps Keep LNG Inventories Elevated

Barchart - Mon Dec 4, 2023

January Nymex natural gas (NGF24) on Monday closed down -0.120 (-4.26%).

Nat-gas prices Monday tumbled to a 2-1/4 month low and closed sharply lower as persistently weak domestic demand for nat-gas is boosting nat-gas inventories.  Warmer-than-average U.S. temperatures are curbing heating demand for nat-gas and are weighing on prices.  Forecaster Atmospheric G2 said weather forecasts are "significantly warmer" in the northeast and southwest between Dec 9-12.

Lower-48 state dry gas production Monday was 105.3 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand Monday was 88.8 bcf/day (-5.4% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Monday were 14.5 bcf/day (-0.6% 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 97% full as of November 26, above the 5-year seasonal average of 86% full for this time of year.  U.S. nat-gas inventories as of November 24 were +8.6% above their 5-year seasonal average.

A decline in U.S. electricity output is bearish 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 25 fell -2.4% y/y to 71,126 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending November 25 fell -0.7% y/y to 4,090,180 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended November 24 unexpectedly rose +10 bcf versus expectations of a -6 bcf decline and a 5-year average draw of -44 bcf.  As of November 24, nat-gas inventories were up +10.1% y/y and were +8.6% 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 December 1 fell -1 rig to 116 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.