Natural Gas Prices Surge Amid Colder Weather Forecasts and European Supply Concerns
On Monday, December Nymex natural gas (NGZ24) saw a significant increase, closing up by +0.150 (+5.31%).
Colder Temperatures Drive Demand
The rise in natural gas prices was influenced by expectations of colder temperatures in the U.S. late this month, which are expected to increase heating demand. Maxar Technologies indicated that forecasts for the November 28 to December 2 period have generally shifted toward colder conditions across much of the country.
European Gas Price Rally Adds Pressure
Support for natural gas prices came not only from U.S. forecasts but also from a jump in European gas prices, which are just below last Friday’s 11-and-a-half month high. This increase followed Gazprom’s decision to halt gas supplies to Austria, raising concerns about energy shortages in Europe as winter approaches.
Production and Demand Statistics
In production news, total dry gas output in the Lower-48 states on Monday was recorded at 102.4 bcf/day, representing a decline of 2.7% year-over-year, according to BNEF. Demand, however, rose to 77.8 bcf/day, a 1.5% increase year-over-year. Liquefied natural gas (LNG) net flows to U.S. export terminals saw a drop, falling to 12 bcf/day, a decrease of 11.9% week-over-week.
Electricity Output Boosts Natural Gas Demand
An uptick in U.S. electricity production positively impacts natural gas demand from utility companies. The Edison Electric Institute reported that for the week ending November 9, electricity output in the Lower-48 increased by 3.19% year-over-year, reaching 73,297 GWh. For the 52-week period ending November 9, output rose by 1.6% year-over-year to 4,164,003 GWh.
Inventories and Market Trends
In a bearish turn for natural gas prices, last Thursday’s EIA report noted a 42 bcf increase in inventories for the week ending November 8, surpassing expectations of a 39 bcf rise and significantly above the 5-year average add of 29 bcf. As of November 8, inventories were 3.7% higher year-over-year and 6.1% above the 5-year seasonal average. In Europe, gas storage levels were reported at 93% full as of November 10, slightly above the 5-year average of 92% for this time of year.
Drilling Rig Count Declines
According to Baker Hughes, the number of active U.S. natural gas drilling rigs decreased by one rig to 101 for the week ending November 15, still above the 3-and-a-half-year low of 94 rigs recorded on September 6. Notably, this count has seen a decline since hitting a 5-and-a-quarter-year high of 166 rigs in September 2022, recovering from the pandemic-era low of 68 rigs in July 2020, according to historical data 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 here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
