Natural Gas Market Indicators – March 1, 2023

Market Summary

• The Weather Channel names Winter Storm Quest and forecasts cold temperatures to move from West to East across the U.S. this week.  
• EIA reports the average withdrawal rate is 23 percent lower than the five-year average despite multiple Winter Storms this withdrawal season.
• Spot prices across the West and Northeast experienced increases primarily due to colder temperatures.

Weather

Following the dissipation of February’s first winter storm, a second winter storm has been named. It is predicted to bring snow and cold temperatures beginning Monday and continuing through Wednesday, March 1. Winter Storm Quest, as named by The Weather Channel, is forecasted to impact the West Monday through Wednesday before bringing colder temperatures to the Plains by Thursday and impacting the Northeast by the end of the week. NOAA’s 16-day forecast mirrors these predictions, forecasting colder temperatures to descend from the Northwest and settle in the West before pushing across the Plains and into the East beginning the first full week of March. Following Winter Storm Quest, NOAA forecasts cooler temperatures in the West and warmer temperatures in the East before cooler temperatures push East and settle in the Northeast for the first two weeks of March. For the week ending February 25, the weather in the U.S. was 13.6 percent warmer than last year and 8.6 percent warmer than normal as measured by heating degree days. All regions experienced warmer temperatures than normal except the W.N. Central, Mountain, and Pacific regions.

Demand

The EIA reported a 1.9 Bcf per day increase in total U.S. consumption from 86.4 Bcf to 88.3 Bcf for the week ending February 22. The increase in consumption was primarily driven by a week-over-week increase in demand of 1.5 Bcf per day from the residential and commercial sectors from 32.9 Bcf per day to 34.4 Bcf per day.

Production

The EIA’s Natural Gas Weekly Update reported a relatively negligible change in production week-over-0ver week. Dry gas production fell from 100.6 Bcf the week prior to 100.5 Bcf for the week ending February 22. Although there is a decrease in production week-over-week, dry gas production is up 5.4 Bcf per day year-over-year. The EIA’s short-term energy outlook also forecasts a 1.1 million barrel per day decrease in oil production out of Russia for 2023, for an expected average of 9.9 million barrels of oil per day. The EIA increased the anticipated oil production out of Russia from the original January forecast of 9.5 million barrels per day, as exports remained higher than anticipated given the European Union’s ban on seaborn crude oil imports from Russia, which began December 5, 2022. Although an increase from the January Short Term Energy Outlook, the EIA still anticipates a decrease in Russian oil production in the coming months as the European Union’s ban on seaborne petroleum products from Russia will likely cause Russian refiners to reduce oil inputs, thus disrupting crude oil production.

Pipeline Imports and Exports

The EIA reports a 0.4 Bcf per day week-over-week increase in imports from Canada from 4.2 Bcf per day to 4.6 Bcf per day for the week ending February 22, down 1.3 Bcf per day year-over-year. Exports to Mexico rose 0.6 Bcf from 5.2 Bcf per day to 5.8 bcf per day for the week ending February 22, up 0.3 Bcf per day year-over-year.

LNG Markets

The EIA’s Natural Gas Weekly Update reports that overall natural gas deliveries to LNG export terminals experienced a week-over-week increase of 0.1 Bcf per day from 13.0 Bcf to 13.1 Bcf per day for the week ending February 22. Although overall deliveries to LNG export facilities increased, feedgas deliveries to terminals in Texas increased 0.2 Bcf per day from 2.7 Bcf per day to 2.9 Bcf per day for the week ending February 22. This increase in feedgas deliveries represents the highest weekly average in deliveries to terminals in Texas since the report week ending June 11, 2022. According to Bloomberg, twenty-two LNG vessels with a combined carrying capacity of 82 Bcf departed the U.S. between February 16 and February 22. The EIA reports that international natural gas futures prices decreased to their lowest levels since the third quarter of 2021 for the report week ending February 22. According to Bloomberg, natural gas prompt month futures at the TTF dropped $1.04 per MMBtu to a weekly average of $15.64 per MMBtu; representing a $10.72 decrease in the prompt month futures price from the same time last year.

Working Gas in Underground Storage

The EIA’s Natural Gas Storage Dashboard weekly update report posted a net withdrawal of 71 Bcf, putting total working natural gas in underground storage for the lower 48 at 2,195 Bcf for the week ending February 17. The current natural gas stocks in underground storage are fifteen percent higher than the five-year average and twenty-two percent more than last year. EIA also reports that the average rate of withdrawals from storage is twenty-three percent lower than the five-year average thus far this withdrawal season. In addition to the Storage Dashboard, EIA’s Short-Term Energy Outlook adjusted forecasted expectations for storage levels, anticipating inventories will close the withdrawal season sixteen percent more than the five-year average with more than 1.8 Tcf in working underground storage.

Rig Count

The total U.S. rig count decreased by a net total of seven rigs for a total of 753 rigs as of February 24. All seven decommissioned rigs were oil directed, reducing total oil rigs from 607 to 600. Reuters reports that the total 600 rigs is the lowest since the beginning of July 2022. The decrease in rigs reflects the general drop in prices via WTI futures. The total rig count is still up 103 rigs year-over-year.

Reported Prices

The EIA’s Weekly Storage Dashboard forecasts natural gas prices to remain below $4.00 per MMBtu until late December 2023. EIA’s Weekly Natural Gas Update reported that regional spot prices generally rose in the West and Northeast and fell in the Midcontinent and the South for the report week ending February 22. For the same week, prices increased $2.25 per MMBtu from $2.13 per MMBtu to $4.38 per MMBtu out of Algonquin Citygate in the Northeast as cooler temperatures settled into the region. Spot prices out of PG&E Citygate in Northern California rose $0.73, up from $7.44 per MMBtu February 15 to $8.17 per MMBtu February 22; the increase was largely due to the winter event which settled colder than normal temperatures over the region for several days. On March 1, prompt-month futures out of Henry Hub were trading around $2.70 per MMBtu, while spot prices ranged from $2.28 per MMBtu in Houston to $9.53 per MMBtu in Northern California.

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