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Nat-Gas Prices Slip on Ample Supplies and Warm U.S. Temps

Barchart - Thu Nov 30, 2023

January Nymex natural gas (NGF24) on Thursday closed down -0.002 (-0.07%).

Nat-gas prices Thursday moved lower for the fifth consecutive session and posted modest losses.  An unexpected build in weekly EIA nat-gas inventories on Thursday pressured prices.  The EIA reported that nat-gas inventories rose +10 bcf last week versus expectations of a -6 bcf draw.  Forecasts for milder U.S. weather that would curb heating demand for nat-gas are also weighing on prices.  Forecaster Atmospheric G2 said Thursday that temperatures will be generally above normal over most of North America over the next 10+ days.  

Lower-48 state dry gas production Thursday was 104.2 bcf/day (+3.6% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 91.3 bcf/day (-0.1% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Thursday were 13.7 bcf/day (-5.4% 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 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 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.

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 Wednesday that the number of active U.S. nat-gas drilling rigs in the week ended November 24 rose +3 rigs to 117 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.