Nat-Gas Prices Tumble as Weekly EIA Inventories Jump

Rich Asplund - Barchart - Thu Nov 16  barchart.com

December Nymex natural gas (NGZ23) on Thursday closed down -0.128 (-4.01%).

Nat-gas prices Thursday retreated after weekly EIA nat-gas inventories rose more than expected.   EIA nat-gas inventories rose +60 bcf last week, higher than expectations of +42 bcf and well above the 5-year average for this time of year of +20 bcf.  

A mixed weather outlook was also negative for nat-gas prices.  On Thursday, forecaster Atmospheric G2 said below-normal temperatures are expected to spread throughout the eastern two-thirds of North America from Nov 21-25, although the West is likely to be slightly warmer than usual.  

Lower-48 state dry gas production Thursday was 103.3 bcf/day (+4.2% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 75.4 bcf/day (-23.5% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Thursday were 14.7 bcf/day (+9.9% 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 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 10 was unchanged at 118 rigs, modestly 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).