Natural Gas Prices Rebound Amid European Market Surge
December Nymex natural gas (NGZ24) closed higher on Friday, gaining +0.038 (+1.36%).
Market Dynamics Drive Price Recovery
On Friday, natural gas prices rose after initially dipping due to forecasts of warmer weather in the U.S. This change reduced expectations for heating demand. However, a surge in European gas prices to an 11-1/2 month high prompted short covering in natural gas futures, leading to a moderate price recovery.
Production and Demand Trends
According to BNEF, lower-48 state dry gas production on Friday stood at 102.4 bcf/day, which marks a -2.1% decline year-over-year. Meanwhile, gas demand in these states was recorded at 78.4 bcf/day, down -3.7% year-over-year. Additionally, LNG net flows to U.S. export terminals increased to 13.9 bcf/day, reflecting a +4.9% week-over-week rise.
Electricity Output Supports Demand for Natural Gas
In a positive development for natural gas demand, the Edison Electric Institute reported on Wednesday that total U.S. electricity output for the week ending November 9 grew by +3.19% year-over-year, reaching 73,297 GWh. Over a broader time frame, U.S. electricity output for the 52 weeks ending November 9 also rose by +1.6% year-over-year to 4,164,003 GWh.
Bearish Storage Reports and European Context
The latest EIA report painted a bearish picture for natural gas prices, revealing a larger-than-expected increase in inventories. For the week ending November 8, natural gas stocks rose by +42 bcf, surpassing the anticipated +39 bcf and significantly exceeding the 5-year average build of +29 bcf for this season. As of November 8, natural gas inventories were +3.7% higher year-over-year and +6.1% above their 5-year seasonal average, indicating a strong supply. In Europe, gas storage levels reached 93% as of November 10, slightly above the 5-year average of 92% for this time of year.
Drilling Rig Activity Declines
Baker Hughes reported that the active count of U.S. natural gas drilling rigs fell by one this week, reaching 101 rigs. This number is modestly above the 3-1/2 year low of 94 rigs recorded on September 6. The rig count has declined from a high of 166 rigs in September 2022 and is still recovering from a pandemic-era low of 68 rigs in July 2020, reflecting trends tracked 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
