Natural Gas Market Indicators – January 9, 2024

Natural Gas Market Summary

The Energy Information Administration reports the average natural gas spot price in 2023 was 62 percent lower than the average spot price in 2022. Prompt-month futures are forecast to remain below $3.00 per MMBtu through October of 2024, influenced by the record-breaking production numbers seen in 2023 which are expected to continue into 2024. Production continues to outpace demand as U.S. consumption only increased marginally week-over-week to conclude December 2023. Working gas in underground storage remains higher than both the five-year average and year-ago levels.

Reported Prices

Prompt-month futures rose above $3.00 per MMBtu as of January 9 before once again dropping below $3.00 beginning in March, according to data from CME. Futures remain below $3.00 per MMBtu through October of 2024, rising to roughly $3.35 per MMBtu in November. As of today, spot prices vary across the country, with the highest prices of $5.31 per MMBtu seen out of Northern California. The EIA’s January 4 release of Today in Energy reports 2023 monthly average spot prices reported out of Henry Hub were the lowest since mid-2020. EIA reports the 62% drop in pricing was likely due to the record-high production, rising natural gas inventories, and flat overall consumption in 2023.

Weather

The week begins with colder temperatures descending from Canada across the West and Midwest while warmer temperatures dominate the East Coast following the first major snowstorm of the season. NOAA anticipates the warmer weather to remain on the East Coast through mid-January when a cold front is expected to descend from the North pushing potential winter weather across the Midwest towards the Coast. NOAA’s GFS Ensemble model expects the colder weather to be a part of a potential polar vortex event that will first impact the Pacific Northwest and the Central plains before moving towards the Midwest, impacting temperatures as far south as Texas. In certain spots, temperatures are expected to drop more than 25 degrees below the average.  For the week ending January 6, the U.S. experienced temperatures roughly 39 percent warmer than normal as measured by heating degree days (HDD). For the month of December, the weather in the United states was roughly 21 percent warmer than last year and 20 percent warmer than normal.

Demand

For the week ending December 20, 2023, total natural gas consumption increased marginally from an average of 93.6 to 93.9 Bcf per day, according to data from the Energy Information Administration. Natural gas demand for power generation remained unchanged week-over-week with an average of 33.3 Bcf per day. Industrial demand fell slightly from 24.8 to 24.7 Bcf per day, while demand in the residential and commercial sectors rose 0.4 Bcf per day from 35.5 to 35.9 Bcf per day. The relatively unchanged demand week-over-week is most likely due to the mild temperatures across the U.S.

Production

Average U.S. dry gas production hovered around 103 Bcf per day over the first eight days of 2024, according to preliminary data from S&P Global Commodity Insights. The 103 average is 2 Bcf per day higher than the roughly 101 Bcf per day average for the same period one year ago.

Pipeline Imports and Exports

The EIA reports a slight increase in average pipeline imports from Canada, rising from 5.1 to 5.2 Bcf per day week-over-week for the week ending December 20, 2023. Over the same report period exports to Mexico declined week-over-week from 6.3 to 6.2 Bcf per day.

LNG Markets

According to the EIA’s Natural Gas Weekly Update, natural gas deliveries to U.S. LNG terminals remained relatively unchanged week-over-week, averaging 14.6 Bcf per day in terminal deliveries for the week ending December 20, 2023. These deliveries for liquefaction followed the departure of twenty-two vessels with a combined carrying capacity of 82 Bcf. Eight of the departing vessels originated from the Sabine Pass in Louisiana, four from Corpus Christi in Texas, four from Freeport in Texas, three from Cameron in Louisiana, two from Cove Point in Maryland, and one from Calcasieu Pass in Louisiana. In contrast, only one LNG vessel arrived to the US between December 13 and 20. The lone vessel docked at Everett LNG terminal in Boston Harbor carrying 3 Bcf in capacity. Prompt-month futures prices out of both JKM and TTF declined week-over-week, dropping $2.47 week-over-week from $15.77 to $13.30 per MMBtu in JKM and $0.84 from $11.73 to $10.89 per MMBTU reported out of TTF.

Working Gas in Underground Storage

The EIA Natural Gas Storage Dashboard Update reports a net withdrawal from storage of 14 Bcf for the week ending December 29, 2023. EIA notes that the resulting stocks were 3,476 Bcf, 399 Bcf higher than the five-year average, and 533 Bcf higher than 2022 levels. As storage levels are high, storage capacity utilization varies by region but has not dropped below 70 percent. The EIA clarifies that storage levels are only 482 Bcf below the five-year maximum of 3,958 Bcf and 2,396 Bcf above the five-year minimum of 1,107 Bcf. It highlights that the highest potential storage capacity is in the Midwest, where there is 968 Bcf of gas in underground storage as compared to the five-year max of 1,139 Bcf. The above-average storage levels across the country are partially the result of the relatively mild temperatures thus far this 2023 – 2024 winter heating season. 

Rig Count

Baker Hughes reports the total rig count in the U.S. decreased by one with the decommissioning of two gas-directed rigs and the addition of one oil-directed rig. Of the 621 total rigs in the U.S., 501 are oil-directed, 118 are gas-directed, and two are miscellaneous.

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