Natural Gas Market Indicators – December 1, 2022

Market Summary

Weather

The Atlantic Basin Hurricane Season officially ended on November 30th. This year, the Atlantic basin produced 14 named storms, eight of which became hurricanes. Of the eight hurricanes, Fiona and Ian eventually developed into Category 4 hurricanes, with Ian grabbing many of the headlines due to the devastation it left in many areas of Florida. This outcome is consistent with NOAA’s early-year forecast of 14 to 31 named storms and six to 10 hurricanes. Now that hurricane season has ended and the winter heating season is underway, NOAA’s 16-day forecast predicts that the cold temperatures in the mid-west will push into the northeast over the first few days of December. Additionally, NOAA expects a cold front to descend from Canada into most of the Northwest. The start of the winter heating season began with temperatures roughly six percent colder than last year and four percent colder than normal as measured by heating degree days. The month of October saw temperatures roughly 46 percent colder than last year but four percent warmer than normal.

Demand

EIA and PointLogic reported an increase of 18.2 Bcf per day in natural gas demand for the week ending November 16 compared to the prior week. The inordinately large increase from 72.2 Bcf per day to 90.4 Bcf per day was primarily driven by the increasing consumption in the residential and commercial sectors, which accounted for nearly 80 percent of incremental demand from 18.8 bcf per day the week prior to 33.2 Bcf per day for the week ending November 16, while updated EIA data reported a slight increase from 33.2 Bcf per day to roughly 34 Bcf per day as of November 23. Total U.S. consumption is up 14.3 Bcf per day from year-ago levels, likely due to the cooler year-over-year temperatures across the US. Total demand for the same time last year averaged 76.1 Bcf per day.

Production

Production continues to rise to unprecedented levels. PointLogic reports a week-over-week increase in dry gas production of 0.9 Bcf per day for the week ending November 16. The most recent edition of the EIA’s Natural Gas Weekly Update shows that the week-over-week increase resulted in average daily production of 100.8 Bcf as compared to the previous week’s average of 99.9 Bcf per day. Average daily dry gas production has increased consistently over the past several months. Production for the week ending November 16 was 5.3 percent higher than over the same week last year.

Rig Count

The U.S. rig count increased by 4 oil-directed rigs for a total of 784 rigs for the week ending November 23. Two gas-directed rigs closed the same week, but the total rig count is up 37% from the same time last year.

LNG Markets

The Natural Gas Weekly Update released by the EIA reported that overall feedgas deliveries to LNG export terminals increased 0.5 Bcf per day week over week to an average of 12 Bcf per day for the week ending November 16. Pointlogic reports that the entirety of the additional 0.5 Bcf per day was delivered to export terminals in Louisiana. Gas prices in Europe and Asia remain elevated even if they remain low compared to late August. As of November 30, prompt-month futures at the Dutch TTF were trading at around $41.50 per MMBtu, while prompt-month futures at the Japan-Korea Marker were trading at $30.50. The high prices natural gas is seeking in international markets, particularly as the heating season ramps up, continue to incent US exporters to export at
full capacity.

Pipeline Imports and Exports

PointLogic reported a 2.2 Bcf per day average increase in imports from Canada as compared to the prior week, from roughly 3.9 Bcf per day for the week ending November 9 to 6.1 Bcf per day for the week ending November 16. The 6.1 Bcf per day average is also up 1.3 Bcf per day as compared to last year. While average imports from Canada have risen slightly, exports to Mexico have dropped only marginally from the week prior, from 5.9 Bcf per day to 5.8 Bcf per day for the week ending November 16. Both the prior report week and this week show a roughly 0.3 Bcf per day increase in exports compared to the same time last year.

Underground Storage

The latest EIA storage report presented its first net withdrawal from storage of the season. For the week ending November 18, the EIA reported a net withdrawal of 80 Bcf from storage as colder temperatures settled across the US. Over the week ending November 11, the US had seen a net injection of 64 Bcf for the week, resulting in total stocks of 3,644 Bcf. What is likely to be the last injection of 2022 capped a striking string of strong injections into storage that took US stocks from the lowest fringes of the five-year range, to right around the five-year average. As a result, the country enters the withdrawal season with storage levels well within the historical range to help gas and electric customers keep warm as temperatures turn colder.

Reported Prices

Natural gas prices across most of the US remain low relative to late summer prices but continue to show higher-than-normal volatility. On November 23, prompt-month future prices at the Henry Hub closed above $7.70 for the first time since late September. However, prices have dropped since and were trading below $7.00 as of November 30. On November 15, Henry Hub spot price rose $2.29 to $5.74 per MMBtu from the $3.45 price the Wednesday prior. As of November 30, natural gas futures continue to trade below $6.00 through December 2023. WTI Crude December contracts were trading at roughly $80.27 per barrel, while the price of gasoline averages $3.47 per gallon.

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