Natural Gas Market Indicators – February 13, 2024

Natural Gas Market Summary

Demand for natural gas sees a slight increase, driven by residential, commercial, and power generation sectors as reported by the EIA while the International Energy Administration (IEA) forecasts a 2.5% global increase in natural gas demand for 2024, mainly in Asia-Pacific and gas-rich regions in Africa and the Middle East. Despite a rebound in production to 103 Bcf per day following Winter Storm Heather, natural gas demand remains slightly lower compared to late 2023 levels. Working gas in underground storage remains higher than the five-year average, with a slight decrease reported, and a slight decline in gas-directed rigs is observed, according to Baker Hughes.

Reported Prices

As of February 13, prompt-month futures continue to be below $3.00 per MMBtu through November before rising slightly to roughly $3.43 in December, according to data from CME, while futures for both March and April remain below $2.00 per MMBtu. Spot prices vary across the country, with the highest prices observed at $6.06 per MMBtu in New England.

Weather

Temperatures rise substantially compared to those seen during Winter Storm Heather, according to NOAAs 16-day forecast. Warmer temperatures hover over the Midwest and push East while cooler temperatures remain over the West Coast for the second week of February. The warmer temperatures persist until a cold front descends from Canada into the Midwest over the weekend before pushing East in the beginning of next week. For the week ending February 10, the weather in the U.S. was roughly eight percent warmer than last year and 23 percent warmer than normal. For the month of January, the weather in the U.S. was roughly 18 percent colder than last year and 5 percent warmer than normal.

Demand

Preliminary data from S&P Global Commodity Insights shows the average demand for the first seven days of February is roughly 91 Bcf per day. The residential and commercial sectors experienced the highest levels of demand with an average of 36 Bcf per day followed by demand for power generation with roughly 31 Bcf per day, and finally the industrial sector with 24 Bcf per day. Total demand increased only marginally from the week prior, rising 1.0 from an average of 90 to 91 Bcf per day. The International Energy Administration’s (IEA) recently released Gas Market Report, Q1-2024 forecasts global natural gas demand to grow by 2.5% in 2024 and concentrated in the markets of Asia-Pacific and the gas-dense countries in Africa and the Middle East. The IEA anticipates the increase in demand to primarily be the result of increased demand from the industrial and residential/commercial sectors. Furthermore, they predict that power generation demand will increase only slightly in the Asia Pacific, North America, and the Middle East as demand is partially offset by the continued reductions in Europe. The IEA also notes global LNG supply will increase by only 3.5% with room for adjustment in forecasting due to delays in construction and the geopolitical environment

Production

Preliminary data reported by S&P Global Commodity Insights indicates that following the production drop below 100 Bcf in January, production has rebounded to an average of 103 Bcf per day from January 19 through February 7. Although average production has rebounded from the drop, the EIA reports natural gas demand remains roughly 2.7 Bcf per day below the 105.8 Bcf per day reported the week ending December 20, 2023.

Pipeline Imports and Exports

The EIA reported a 1.8 Bcf per day decrease in pipeline imports from Canada, declining from 7.8 to 6.0 Bcf per day week-over-week for the week ending January 31. Over the same period, exports to Mexico remained unchanged with an average of 6.0 Bcf per day in exports.

LNG Markets

The EIA’s January 7 edition of Today in Energy reports the volumes of LNG contracted in 2023 were 52 percent less than the contracted volumes in 2022. Nine total projects signed sale and purchase agreements (SPAs) in 2023; three-quarters of the agreed volumes in the SPAs had a contract duration of 20 years where the earliest start date is the fourth quarter of this year. The EIA continues and notes more than half of the 2023 SPAs were indexed to Henry Hub compared to the roughly two-thirds of the SPAs that were indexed for Henry Hub in 2022. According to the EIA’s Natural Gas Weekly Update, natural gas deliveries to U.S. LNG terminals increased roughly seven percent week-over-week from an average of 13.1 Bcf per day to 14.0 Bcf per day for the week ending January 31. The 0.9 Bcf per day increase in deliveries was primarily the result of a 0.8 Bcf per day increase in natural gas deliveries to terminals outside the Gulf Coast, equating to a 41.9 percent rise in deliveries from 0.4 to 1.2 Bcf per day. As deliveries to natural gas terminals increased, so did the number of LNG vessels departing the U.S. Twenty-eight LNG vessels with a combined capacity of 103 Bcf departed the U.S. between January 25 and January 31. Reuters reports one of the three liquefaction trains at Freeport LNG in Texas will be offline for roughly one month to complete repairs on one of the “refrigeration electric motors” following Winter Storm Heather in January of this year. International natural gas futures prices dropped $0.07 from an average of $9.20 to $9.13 per MMBtu out of JKM, while prices rose $0.22 from $8.91 to $9.13 per MMBtu out of TTF.

Working Gas in Underground Storage

The Energy Information Administration reports a 197 Bcf withdrawal from storage for the week ending January 26, putting underground storage levels around 2,659 Bcf. Current underground storage levels are five percent higher than the five-year average and two percent higher year-over-year. Although the average rate of storage withdrawals has been five percent higher than the five-year average this winter heating season, underground storage capacity across the country is still, on average, 62 percent full.

Rig Count

Baker Hughes reports a total of 623 rigs for the week ending February 9, reporting an additional four gas-directed rigs from the prior report week. Of the 623 total rigs, 499 are oil-directed and 121 are gas-directed.

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