Natural Gas Market Indicators – January 23, 2024
Natural Gas Market Summary
Winter Storm Heather swept across the country, resulting in record-breaking demand for natural gas. Natural gas met residential and commercial needs while also catering to a significant portion of power generation demand. Production dipped below 100 Bcf per day for the first time since July 2023, as demand peaked throughout Winter Storm Heather. Despite substantial demand and a slight production decline, prompt-month futures remain below $3.00 per MMBtu.
Reported Prices
As of January 23, prompt-month futures continue to be below $3.00 per MMBtu, even with colder-than-normal temperatures nationwide last week. This trend persists through October 2024, rising to approximately $3.70 in November, according to data from CME. Spot prices currently vary across the country, with the highest prices observed at $4.64 per MMBtu in New England.
Weather
Winter Storm Heather moved from West to East across the U.S. last week, dropping several feet of snow and ice while keeping most of the country in sub-zero temperatures for several days. For the week ending January 20, the weather in the U.S. was roughly 59 percent colder than last year and 26 percent colder than normal as measured by heating degree days. All regions experienced colder temperatures than normal and colder temperatures than last year, except the Pacific region. NOAA anticipates the colder temperatures to abate as warmer temperatures progress from West to East for the remainder of the week and through the end of January.
Demand
Preliminary data from S&P Global Commodity Insights indicates the largest natural gas demand day in history on January 15, when roughly 169 Bcf was consumed. The record-breaking demand includes pipeline exports and LNG feedgas, and surpasses the previous record set during Winter Storm Elliott in December of 2022. According to the EIA, natural gas demand for power generation also spiked to 43 Bcf per day on January 16 before declining to 37 Bcf per day on January 18. Additionally, the EIA reports an increase in demand in both the industrial and residential/commercial sectors as demand rose 1.8 Bcf per day from 25.2 to 27 Bcf per day for the industrial sector and 15.7 Bcf per day from 42.5 to 58.2 Bcf per day in the residential/commercial sector. For more information on the demand variances around the U.S. throughout the duration of Winter Storm Heather, check out the NGMI Special Release found here.
Production
Average U.S. dry gas production dropped below 100 Bcf per day on January 13 for the first time since July of 2023, according to preliminary data from S&P Global Commodity Insights. Production levels remained below 100 Bcf per day until January 18, likely due to well-head freeze-offs as a result of the arctic temperatures from Winter Storm Heather. Although natural gas production declined week-over-week, the EIA’s Drilling Productivity Report forecasts a month-over-month increase in output from three of the seven primary natural gas-producing regions throughout the U.S. from January to February of this year. The increases are predicted to be seen in the Permian, Bakken, and Niobrara, while slight month-over-month declines in production are anticipated in the Appalachia, Haynesville, Eagle Ford, and Anadarko.
Pipeline Imports and Exports
The EIA reported a 1.1 Bcf per day increase in pipeline imports from Canada, rising from 6.5 to 7.6 Bcf per day week-over-week for the week ending January 17. Over the same report period, exports to Mexico declined 0.2 Bcf from 6.2 to 6.0 Bcf per day. The increase in pipeline imports from Canada and decline in exports to Mexico may be in part due to Winter Storm Heather as natural gas utilities worked to meet the increased demand from the below-normal temperatures across the country.
LNG Markets
According to the EIA’s Natural Gas Weekly Update, natural gas deliveries to U.S. LNG terminals declined roughly 15 percent week-over-week from an average of 14.8 to 12.5 Bcf per day for the week ending January 17. The decline was mainly the result of the 1.2 Bcf per day drop in natural gas deliveries to terminals in South Louisiana. While deliveries to natural gas terminals declined, twenty-seven LNG vessels with a combined capacity of 99 Bcf departed the U.S. between January 11 and January 17. International natural gas futures prices dropped $0.93 from $11.44 to $10.51 per MMBtu out of JKM and $0.72 from $10.34 to $9.62 out of TTF. EIA notes natural gas futures reported out of TTF are averaging below $10.00 per MMBtu for the first time since mid-summer of 2023.
Working Gas in Underground Storage
Puget Sound Energy (PSE) urged their West Coast customers to conserve energy use beginning on the afternoon of January 13th and into Sunday morning amid the arctic cold snap due to an outage at the Jackson Prairie Underground Natural Gas Storage Facility in Chehalis, Washington. The storage facility is co-owned by Puget Sound Energy and is the fourteenth largest storage reserve in the country with 44 Bcf in natural gas storage capacity, and can meet up to 25 percent of the Pacific Northwest’s peak heating demand during the coldest days of the winter heating season. Although the facility was back online by Saturday evening, a local paper reports the outage was due to a natural gas line outage in Lewis County caused by failed redundant fiber optic cables Storage levels drop as the EIA Natural Gas Storage Dashboard reports a 154 Bcf withdrawal from storage for the week ending January 12, putting underground storage levels around 3,182 Bcf.
Rig Count
Baker Hughes reports a net increase of one in the total rig count in the U.S. for the week ending January 19. While two oil-directed rigs were decommissioned, three gas-directed rigs came online, resulting in a total of 610 active rigs.