Nat-Gas Prices Post Moderate Gains on a Jump in European Nat-Gas

October Nymex natural gas (NGV23) on Friday closed +0.027 (+1.03%).

Nat-gas prices Friday posted moderate gains, garnering carryover support from a rally in European nat-gas prices to a 1-month high.

Gains in nat-gas were limited by forecasts for warmer-than-normal fall temperatures that would reduce heating demand for nat gas. Forecaster Atmospheric G2 said the middle of the U.S. and much of Canada are expected to be warmer than normal for the rest of this month, with temperatures 8 to 15 degrees above normal.

A bearish factor for nat-gas prices was an end to labor unrest for LNG workers in Australia after Chevron and labor unions reached an agreement to end strikes at several Australian LNG export facilities. Australia is the world’s third-largest liquified natural gas (LNG) exporter, accounting for about 10% of global supplies last year.

Lower-48 state dry gas production Friday was 100.9 bcf/day (+1.7% y/y), according to BNEF. Lower-48 state gas demand Friday was 65.4 bcf/day, -3.6% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 12.1 bcf/day or -8.4% w/w.

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 94% full as of September 18, well above the 5-year seasonal average of 85% full for this time of year. U.S. nat-gas inventories as of September 15 were +5.9% 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 September 16 rose +2.3% y/y to 80,267 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending September 16 fell -0.9% y/y to 4,083,880 GWh.

Thursday’s weekly EIA report of +64 bcf for the week ended September 15 was neutral for nat-gas prices since it was close to expectations of +65 bcf, although below the 5-year average for this time of year at +84 bcf. As of September 15, nat-gas inventories were up +13.7% y/y and were +5.9% above their 5-year seasonal average, signaling ample nat-gas supplies.

Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended September 22 fell by -3 to 118 rigs, modestly above the 19-month low of 113 rigs from September 8. Active rigs rose to a 4-year high of 166 rigs in September 2022. Active rigs have roughly doubled from the record low of 68 rigs posted in July 2020 (data since 1987).

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