Nat-Gas Prices Tumble as Warmer US Spring Looms
May Nymex natural gas (NGK24) on Wednesday dealt a blow by falling -0.021 (-1.13%).
Heavier Blow in the Face of Mild Winter
May nat gas prices took a nosedive after reaching a 3-week peak, succumbing to long liquidation as recent weather updates hinted at warmer US temperatures. The thaw on the horizon spells bad news for nat-gas demand, dampening the need for heating as the season transitions. Forecaster Atmospheric G2, in a grim pronouncement on Wednesday, forecasted spring’s embrace for the eastern half of the US from April 8-12, with the west slated to receive a share of above-normal temperatures.
Nat-Gas Market Shivers under Weight of Abundance
The year has been ruthless to nat-gas prices, with nearest-futures (NGJ24) plummeting to a 3-3/4 year low just last Tuesday. A surprisingly mild winter eviscerated heating consumption for nat-gas, propelling inventories to towering heights well above average. Recent data from March 22 unveiled that US nat-gas reserves were a daunting +41.1% over their 5-year seasonal average, pointing towards a glut of supply.
Freeport LNG Terminal Damage Fans the Flames
The Freeport LNG nat-gas export terminal in Texas, facing the aftermath of extreme cold in Texas, downed one of its three production units on March 1 due to damages. Although the unit has tentatively resumed operations, a full revival is yet to come. Freeport relayed that once the unit is fully operational, the other two will plunge into maintenance mode. This precarious dance means all three units won’t return until May, effectively capping US nat-gas exports and boosting domestic inventories.
Slowed Drilling Rigs Struggle to Keep Pace
Baker Hughes disclosed that the number of active US nat-gas drilling rigs clung to a 2-year low of 112 rigs, unchanged from the prior week. The active rigs, having plummeted from a peak of 166 rigs in September 2022, now discover themselves recovering from the pandemic era nadir of 68 rigs recorded in July 2020.
Electricity Output Offers a Glimmer of Hope
An upswing in US electricity output presents a silver lining in the gloomy nat-gas scenario. The Edison Electric Institute divulged that total US electricity output for the week concluding March 30 dipped marginally by +0.13% on a year-over-year basis to 70,997 GWh. Over the 52-week period culminating on March 30, cumulative US electricity production dipped by -0.37% year-over-year to 4,094,185 GWh.
Anticipated EIA Data to Provide Respite?
The consensus teases a potential decrease of -42 bcf in Thursday’s weekly EIA nat-gas inventories, a more substantial decline compared to the five-year average for this juncture of the year standing at -1 bcf.
Last week’s EIA report proved bullish for nat-gas prices as the inventories waned by -36 bcf for the week ending March 22, surpassing expectations of -28 bcf and trumping the 5-year average decline of -27 bcf for the corresponding period. As of March 22, nat-gas reserves were up +23.9% on a yearly basis and were a hefty +41.1% above their 5-year seasonal benchmark, signaling a plethora of nat-gas supplies. In Europe, gas storage stood at 59% full as of April 1, overshooting the 5-year seasonal average of 42% full for that time of the year.
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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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
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