Natural Gas Market Indicators – February 27, 2024

Natural Gas Market Summary

The Energy Information Administration forecasts demand to outpace supply in 2024, while futures reported by CME out of Henry Hub are expected to remain below $3.00 per MMBtu through November. The residential and commercial sectors lead in demand for the first 21 days of February, while production in the same period outpaces production in January by 5 Bcf. Pipeline imports from Canada declined week-over-week while exports to Mexico increased slightly, while the majority of LNG exports departed the Corpus Christi LNG Terminal. Underground storage across the country remains, on average, 60 percent full, while the number of active gas-directed rigs reported by Baker Hughes remains unchanged week-over-week at 121 rigs.

Reported Prices

As of February 26, prompt-month futures remain below $2.00 per MMBtu through May, and remain below $3.00 per MMBtu through November according to data from CME. While futures remain low, spot prices vary across the country, with the highest prices observed at roughly $3.23 per MMBtu in New England. Looking forward, the Energy Information Administration’s (EIA) February 12 edition of Today in Energy forecasts an increase in natural gas prices for 2024 as demand for natural gas grows faster than supply. Although demand is forecasted to outpace supply, EIA still anticipated Henry Hub spot prices to remain below $3.00 per MMBtu throughout the remainder of 2024 and into 2025.

Weather

NOAA’s 16-day forecast anticipates warmer weather to settle across the country for the beginning of this week before a cold front descends from the North and pushes East for the beginning of the weekend. The weather in the U.S. was roughly two percent warmer than last year and twelve percent warmer than normal for the week ending Febriary 24. Given that the weather was two percent warmer than last year, all regions experienced warmer temperatures than normal except for New England.

Demand

The average demand for the first 21 days of February is roughly 92 Bcf per day, as derived from preliminary data from S&P Global Commodity Insights. The residential and commercial sectors had the highest reported demand with an average of roughly 36 Bcf per day, followed by natural gas demand for power generation with 31 Bcf per day, and finally the industrial sector with an average of 24 Bcf per day. Although S&P Global Commodity Insights indicates the first 21 days of February averaged 92 Bcf per day in demand, the EIA reports a 1.8 Bcf per day decline in demand week-over-week for the week ending on February 14. The decline from 90.9 to 89.1 Bcf per day in demand is primarily the result of 2 Bcf per day decline in demand from the residential and commercial sectors.

Production

Preliminary data reported by S&P Global Commodity Insights indicates that the average total supply for the U.S., including both on-shore, off-shore, and LNG, is roughly 105 Bcf per day for the first 21 days of February. The average 105 Bcf per day in production for the first 21 days of February is 5 Bcf more than the 100 Bcf per day in production reported for the first 21 days of January. In addition to preliminary data by S&P Global Commodity Insights indicating the monthly production average has increased month-over-month, the EIA reports a 0.3 Bcf per day increase week-over-week from 104.4 to 104.7 Bcf per day for the week ending February 14. According to the February 6 release of the EIA’s Short-Term Energy Outlook, the Energy Information Administration anticipated production would reach 105 Bcf per day by March, a forecast which has come to fruition according to data from S&P Global commodity Insights. The Short-Term Energy Outlook anticipates production will increase in 2025 and average more than 106 Bcf per day. Taking a look at a closer forecast, the EIA’s February 12 update to the Drilling Productivity Report anticipates an increase in natural gas production from four of the seven production regions. The Drilling Productivity Report forecast anticipates the Permian, Eagle Ford, Bakken, and Niobrara to have increased production for March 2024. Although there are increases in production, the slight declines in production anticipated from the Haynesville, Appalachia, and Anadarko regions result in an expected 0.3 Bcf per day decline in production from February to March.

Pipeline Imports and Exports

The EIA reported a 0.4 Bcf per day increase in pipeline imports from Canada, increasing from 5.1 to 5.5 Bcf per day week-over-week for the week ending in February 21. Over the same period, exports to Mexico declined an average of 0.1 Bcf per day from 6.0 to 5.9 Bcf per day for the week ending February 21.

LNG Markets

According to the EIA’s Natural Gas Weekly Update, natural gas deliveries to U.S. LNG terminals increased roughly 0.5 Bcf per day week-over-week from an average of 13.3 to 13.8 Bcf per day for the week ending February 14. The 0.5 Bcf per day increase in deliveries is primarily the result of a 0.6 Bcf per day increase in gas deliveries to terminals in South Texas, the majority of which went to the Corpus Christi LNG Terminal. While deliveries increased to South Texas, natural gas deliveries to South Louisiana declined 0.1 Bcf per day week-over-week from 9.2 to 9.1 Bcf per day for the week ending February 14. In addition to the overall increase in natural gas deliveries to export terminals, twenty-six LNG vessels with a combined LNG-carrying capacity of 90 Bcf departed the U.S. between February 8 and February 14. EIA reports that international prompt-month futures prices declined $0.04 from $9.46 to $9.42 per MMBtu out of JKM and $0.81 per MMBtu from $9.07 to $8.26 per MMBtu out of the TTF.

Working Gas in Underground Storage

The EIA reports a 60 Bcf withdrawal from storage for the week ending February 16, putting underground storage levels around 2,470 Bcf. Current underground storage levels are 22 percent higher than the five-year average and 12 percent higher year-over-year. Thus far this winter heating season the rate of withdrawal is 17 percent lower than the five-year average. Given above-average levels of storage at the conclusion of refill season and the lower rate of withdrawal this winter heating season, underground storage across the country is 59 percent full on average.

Rig Count

Baker Hughes reports a total of 626 rigs for the week ending February 23, an increase of six oil-directed rigs from the prior report week and one decommissioned gas-directed rig. Of the 626 total rigs, 503 are oil-directed, while 120 are gas-directed.

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