Nat-Gas Prices Weighed Down by Abundant Supplies

April Nymex natural gas (NGJ24) on Thursday closed down by -0.016 (-0.94%).

Nat-gas prices closed moderately lower on Thursday due to ample US supplies.  Thursday's weekly EIA inventory report showed that US nat-gas inventories are abundant and +41.0% above their 5-year average as of March 15, the most in nearly eight years.    Thursday's US weather forecast was mixed for nat-gas as the Commodity Weather Group forecast colder than average temperatures for the western and central US from March 26-20, while the forecasts for the eastern US shifted warmer.  

Nat-gas prices have collapsed this year and plunged to a 3-1/2 year nearest-futures low (H24) in late February as an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average.  The US Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices.

Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas.  The unit reopened partially last week.  However, Freeport said last Friday that once the production unit is fully reopened, the other two units will be taken down for maintenance, and all three units will not be back online until May.  The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.  

Lower-48 state dry gas production Thursday was 100.0 bcf/day (+0.4% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 88.2 bcf/day (+11.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 12.6 bcf/day (-0.7% w/w), according to BNEF.

A decrease in US electricity output is negative for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total US electricity output in the week ended March 16 fell -5.45% y/y to 70,442 GWh (gigawatt hours), and cumulative US electricity output in the 52-week period ending March 16 fell -0.24% y/y to 4,096,176 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended March 15 rose by +7 bcf, more than expectations of +5 bcf, and well above the 5-year average decline of -42 bcf for this time of year.  As of March 15, nat-gas inventories were up +22.7% y/y and were +41.0% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 60% full as of March 18, above the 5-year seasonal average of 42% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending March 15 rose by +1 rig to 116 rigs, just above the 2-year low of 113 rigs posted September 8.  Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
 

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