Natural Gas Prices Rise Amid Cooler Forecasts
Prices are moving up as demand expectations increase for heating.
On Wednesday, December Nymex natural gas (NGZ24) closed at +0.076, a rise of +2.61%. Despite these gains, prices remained below the six-week high reached earlier this week. The anticipation of colder temperatures across the United States, which could boost heating demand for natural gas, contributed to Wednesday’s price increase. Maxar Technologies revised their forecast, indicating cooler weather for the West Coast, with these conditions expected to spread eastward around the period of November 18-22.
According to BNEF, dry natural gas production in the lower 48 states was 100.4 bcf/day, showing a decline of 5.2% compared to last year. Gas demand in the same region also decreased, dropping to 81.7 bcf/day, a decrease of 3.1% year-over-year. However, net flows of liquefied natural gas (LNG) to U.S. export terminals were up, reaching 13.7 bcf/day, an increase of 1.5% week-over-week.
In a positive sign for natural gas demand, U.S. electricity output is on the rise. The Edison Electric Institute reported that total electricity output in the lower 48 states rose by +3.19% year-over-year, totaling 73,297 GWh for the week ending November 9. Additionally, electricity production over the past year increased by +1.6% to 4,164,003 GWh.
Looking ahead, analysts expect Thursday’s weekly EIA report to show a rise in natural gas inventories for the week of November 8, projecting an increase of +39 bcf, which is above the five-year average increase of +29 bcf for this timeframe.
Last week’s EIA report had a bearish impact on natural gas prices, as inventories for the week ending November 1 climbed by +69 bcf, exceeding both expectations of a +68 bcf rise and the five-year average build of +32 bcf for this period. As of November 1, natural gas inventories were down by 4.2% year-over-year but remained 5.8% above their five-year seasonal average, indicating a healthy supply. In Europe, gas storage was reported at 93% full as of November 10, slightly above the five-year average of 92% for this time of year.
In terms of drilling activity, Baker Hughes reported last Friday that the number of active U.S. natural gas rigs remained steady at 102 for the week ending November 8. This figure is slightly above the 94 rigs recorded on September 6, which was a low not seen in over three years. Active rigs have declined from a five-year high of 166 rigs in September 2022, which is a stark contrast to the pandemic-era low of 68 rigs recorded in July 2020, a figure that has been tracked since 1987.
On the date of publication,
Rich Asplund
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