Market Recovery:

Nat-gas prices showed signs of life, with May Nymex natural gas closing higher on Thursday. The rebound came after weekly EIA inventories surprised analysts by falling more than anticipated. The report indicated a draw of -36 bcf, exceeding the expected -28 bcf decline last week.

Weather and Demand:

Initially, nat-gas prices dipped due to a mixed weather outlook. While the north-central US was projected to experience above-average temperatures, other regions might see a colder spell. This fluctuation comes amidst a backdrop of plunging prices this year, as a mild winter suppressed heating demand and inflated inventories. As of March 15, US nat-gas stockpiles were +41.0% above the 5-year seasonal average.

Export Terminal Woes:

The Freeport LNG export facility in Texas faced setbacks due to cold weather damage, impacting nat-gas exports. The partial reopening of one production unit in March hinted at a prolonged recovery process. With full operations not expected until May, the terminal’s restricted capacity is likely to constrain US nat-gas exports and contribute to bloated inventories.

Production and Consumption:

Lower-48 state gas production and demand remained steady, with dry gas production at 100.1 bcf/day and consumption at 83.1 bcf/day. However, a drop in US electricity output, as reported by the Edison Electric Institute, could further dampen nat-gas demand from utility providers.

EIA Reports Signal Positivity:

The recent EIA report painted a bullish picture for nat-gas prices, with inventories falling by a notable -36 bcf compared to the 5-year average decline. Despite being up +23.9% y/y, nat-gas supplies remained +41.1% above their seasonal average, indicating an oversupply. European gas storage levels were also above average for this time of year.

Rig Counts and Trends:

According to Baker Hughes, the number of active US nat-gas drilling rigs remained unchanged at 112, a 2-year low. This stagnation follows a decline from the peak of 166 rigs in September 2022 to the current levels, reflecting the tumultuous journey of nat-gas drilling activities since the pandemic lows in July 2020.

More Natural Gas News from Barchart

On the date of publication, Rich Asplund did not have positions in any securities mentioned. The information in this article is for informational purposes only, referencing the Barchart Disclosure Policy.

The opinions expressed in this article are those of the author and may not necessarily align with those of Nasdaq, Inc.