Natural Gas Market Indicators – May 1, 2023
Market Summary
- As of April 27, U.S. storage stocks remain 35.4% above last year’s levels, and 22.2% above the five-year average. European storage levels are 56% full as of April 1.
- LNG imports to the EU were 65% higher in 2022 as compared to 2021.
- Prices out of Henry Hub remain below $2.35, continuing the recently consistent low prices.
Weather
The Western U.S. is currently experiencing warmer than normal temperatures while the Midwest is colder than normal. NOAA’s 16-day forecast anticipates warmer temperatures to descend from the North into the Western part of the U.S., and cool temperatures to settle over the East for the first full week of May. As the official start of the hurricane season approaches, hurricane forecasting teams have begun to issue predictions for 2023. A few editions ago, NGMI highlighted Colorado State University’s prediction of a “slightly below average” season. On April 26, the hurricane forecasting team at the University of Arizona issued a prediction of an “above average” hurricane season comparable to the 2017 season which saw three major hurricanes in the Atlantic. NOAA is expected to release its prediction for the upcoming hurricane season in late May.
Demand
The Energy Information Administration’s Natural Gas Weekly Update reported an overall 4.5 Bcf per day increase in total U.S. consumption from 67.4 Bcf per day to 71.9 Bcf per day for the report week ending April 26. The 6.7% increase was primarily driven by a 3.6 Bcf per day increase in consumption from the residential and commercial sectors as the weather across the U.S. produced below-normal temperatures. In contrast, the power generation and industrial sectors only experienced marginal week-over-week increases.
Production
The EIA’s recently updated Drilling Productivity Report forecasts a slight month-over-month increase of 330 MMcf in natural gas production in May. The majority of the increase in production is anticipated to come from the Haynesville, Permian, and Eagle Ford regions. The EIA estimates that the Haynesville region will be the leading production region in May, following a recent report that the Haynesville set a production record high of 14.4 Bcf per day in February of 2023. The Natural Gas Weekly Update reports dry gas production has increased 0.7 Bcf per day from 100.8 Bcf per day to 101.5 Bcf per day for the report week ending April 26. Although there was only a 0.7% increase in production week-over-week, production is up 5.6 Bcf per day year-over-year from 95.9 Bcf per day in 2022 to 101.5 Bcf per day this year.
Pipeline Imports and Exports
Imports from Canada increased slightly week-over-week from 4.7 Bcf per day to 5.0 Bcf per day for the report week ending April 26, as reported by the Energy Information Administration. The EIA also reports a slight increase of 0.5 Bcf per day in exports to Mexico for the same week, from 5.1 Bcf per day to 5.6 Bcf per day.
LNG Markets
Overall deliveries to U.S. LNG export terminals decreased by 0.5 Bcf per day week-over-week to an average of 14.0 Bcf per day for the report week ending April 26, as reported by the EIA. Notably, deliveries to facilities in Texas decreased by 9.0%. Deliveries to facilities in South Louisiana also decreased slightly, by 0.8%. According to the EIA, twenty-eight LNG vessels with a combined capacity of 104 Bcf departed the U.S. between April 20 and April 26. In a retrospective look, Europe’s LNG imports were 65% higher in 2022 than the year prior, primarily reflecting the shift away from pipeline imports from Russia. The EIA reports that Europe imported 16.3 Bcf per day in 2022, and set a record monthly high of 17.9 Bcf per day in December. The U.S. was the primary source of LNG imported into the EU, as reported by EIA’s March 22nd edition of Today in Energy. In 2022, roughly 64% of U.S. LNG was delivered to European facilities.
Working Gas in Underground Storage
U.S. storage levels remained below both the five-year average and towards the bottom of the five-year range for a large portion of the 2022-2023 winter heating season. However, a mild winter assuaged fears of demand potentially outpacing available supplies. As of April 27, U.S. stocks remained 35.4% above last year’s levels, and 22.2% above the five-year average. Europe experienced a similar story as a mild winter helped reduce concerns of inadequate supplies. As a result, the EIA reports European natural gas storage inventories were 56% full as of April 1, and closed the heating season with stocks at 2.02 Tcf, which exceeded the previous record of 1.98 Tcf at the end of the 2019-2020 winter heating season. The record-breaking end-of-season storage levels are the result of Europe’s second-warmest winter on record, which led to a decrease in heating demand, in addition to the Europe-wide effort to conserve natural gas.
Rig Count
The U.S. rig count increased by five rigs for a net total of 753 rigs as of April 21. Three of the new additions were oil-directed, and two were gas-directed.
Reported Prices
The EIA Natural Gas Storage Dashboard forecasts natural gas prices to remain below $4.00 per MMBtu through the next winter heating season and into the Spring of 2024. According to the EIA, weekly average prompt-month futures prices for LNG in the East Asian market fell $0.66 to a weekly average of $11.90 per MMBtu while futures out of the TTF fell $0.51 to a weekly average of $12.84 per MMBtu for report week ending April 26. Year-over-year prices decreased substantially, falling $13.36 and $18.45 in East Asia and TTF respectively. As of May 1, prices out of Henry Hub were trading below $2.35 per MMBtu.
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