Nat-Gas Prices Jump on Colder US Temps and Outlook for a Large EIA Inventory Draw

January Nymex natural gas (NGF25) on Wednesday closed sharply higher by +0.215 (+6.80%)

Jan nat-gas prices on Wednesday rallied sharply to a 2-week high after forecasts turned colder for the eastern half of the US for late December, signaling increased heating demand for nat-gas.  Forecaster Maxar Technologies said Wednesday that the forecast shifted colder for the eastern half of the US for December 21-25.

Expectations for a larger-than-normal draw in weekly US nat-gas inventories also supported prices.  Thursday's weekly EIA nat-gas inventories are expected to fall -168 bcf for the week ended December 6, a much larger draw than the five-year average for this time of year of -71 bcf.

Lower-48 state dry gas production Wednesday was 104.6 bcf/day (-1.7% y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 104.7 bcf/day (+4.4% y/y), according to BNEF.  LNG net flows to US LNG export terminals Wednesday were 13.8 bcf/day (+4.3% 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.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended November 29 fell -30 bcf versus expectations of -36 bcf and less than the 5-year average draw for this time of year of -47 bcf.  As of November 22, nat-gas inventories were up +5.9% y/y and were +7.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 82% full as of December 8, below the 5-year seasonal average of 84% 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). 

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. More news from Barchart

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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