EIA Reports U.S. Natural Gas Stocks Fell 60Bcf Last Week

EIA reported natural gas storage in the U.S. last week came in less expected at -60Bcf in storage with consensus a draw of -65Bcf. For perspective in the same week last year stocks were -75Bcf, with a five-year (2017-2021) average -168Bcf. The global natural gas price selloff got some this week reprieve after hitting the lowest level since June 2020 last week. Catalysts included paper covering and the Chesapeake announcing production cuts and Freeport Train one began to flow again. Headwinds include Weather forecasts, LNG exports and the US Admin delaying consideration of new natural gas export terminals.

Last week the U.S. Benchmark Henry Hub March futures contract settled at $1.61 per million British thermal units, down 12.9% for the week. This follows HH futures down 15% and 10.59% prior weeks. European and British natural gas futures also fell more last week. UK Gas closed at GBp/thm 60.29 down -9.23% for the week after falling -7.46% last week. Dutch TTF futures closed around €24.82 per megawatt-hour, down -8.46% for the week, after falling -7.46% last week.

Natural gas Storage

Production is back after cold temperatures production freeze-offs. Natural Gas futures prices hover above lows with warmer temperature forecasts, US LNG licensing on hold and huge above average draws in storage largely behind.

Natural gas production ahead of the winter storms was back at record levels. That rise in gas output is due primarily to increased interest in oil drilling in shale basins that also produce a lot of associated gas like the Permian in West Texas and eastern New Mexico. The No. 2 U.S. oil producer Chevron has said that it plans to raise capital expenditures in the Permian by 25% in 2024 from its annual guidance and aims for record output despite a more modest rig count plan for the largest U.S. oilfield. CVX expects to average 13 to 14 company-operated rigs in 2024 in the basin, up from 2022 but fewer than previously anticipated.

US delaying consideration of new natural gas export terminals.

The Biden administration att he end of January confirmed it is delaying consideration of new natural gas export terminals in the United States. This comes as gas shipments to Europe and Asia have soared since Russia’s invasion of Ukraine. Biden had promised the EU that the US would not allow the EU to not be supported by U.S. gas, an interesting geopolitical move by Biden.

Seven LNG terminals currently operate in the U.S., predominately in Louisiana and Texas. Up to five more are expected to come online in the next few years. Biden’s action would not affect those projects, it could delay a dozen or more LNG projects that are pending or in various stages of planning. Included in the delays is the Calcasieu Pass 2 project, or CP2, along Louisiana’s Gulf Coast. If built, CP2 would be the largest export terminal in the United States.

The move has been seen as politically motivated by President Joe Biden with the 2024 presidential election year heats up. The move aligns with environmentalists against further exports of LNG with the fear they are planet-warming emissions and Biden has pledged to cut climate pollution in half by 2030.

European and British natural gas pulled back further.

The European and British natural gas futures fell this week. UK Gas closed at GBp/thm 65.60 down -8.23% for the week and down -14.95% monthly. Dutch TTF futures closed around €27.12 per megawatt-hour, down-7.46% for the week, and down -12.36% monthly.

The European and British natural gas futures have pulled back after they had soared over 40% to the highest in eight months with catalysts from expected cooler temperatures, concerns about supply escalated by geopolitical risks and strikes at Chevron LNG facilities in Australia. Israel shut down a Chevron gas field which could affect liquefied natural gas exports from Egypt. The Balticconnector pipeline linking Finland and Estonia leak and closure raised winter infrastructure security worries.

Europe NG storage was at 65.532% of capacity on February 16, 2024. That is +34.2% average of capacity according to data from Gas Infrastructure Europe and the highest ever for this time of year. Per country: Austria at 80.02%, France at 50.11%, Germany at 71.48%, Italy at 59.83%, Netherlands at 59.16%, Spain at 80.26%, U.K. 66.73%

LNG demand is a big driver of natural gas demand. Average gas flows to the seven big U.S. LNG export plants. Production has not let up, Permian and Haynesville production at all-time highs of late. Eagle Ford output very close to all-time highs.

Into The Vortex Contents

Click on the links below to navigate to the relevant section.

  1. EIA Natural Gas Storage Forecast and Analysis
  2. Natural Gas Quick Summary
  3. Rig Watch
  4. Weather
  5. LNG and Export Watch
  6. Natural Gas Import Watch
  7. Natural Gas Demand Watch
  8. Nuke Watch
  9. Natural Gas Futures Technical Analysis
  10. Option Volatility and Gamma
  11. DCOT Report

The Week Ahead

This Week in Energy

Energy Price Matrice Performance

Moving forward weather, ETF speculation and the strength of LNG demand will determine natural-gas prices. Remember natural gas prices are majority affected by domestic actions, for the US the variance is exports, that is Mexican pipelines, Canadian imports and LNG exports.

EIA Weekly Storage Report

  • Report Date: 2/15/2024 Via TradersCommunity.com
  • Release Time: Thursday 2/22/2024 10:30 p.m. ET
  • Market Expectations
  • Actual -60 Bcf Prior -49 Bcf
  • Consensus Forecast –65 Bcf
  • Cons. Range -48 Bcf to -82 Bcf
  • Last Year: -75 Bcf
  • 5 Year Average: -168 Bcf

Summary

EIA reported natural gas storage in the U.S. last week came in less expected at -60Bcf in storage with consensus a draw of -65Bcf. For perspective in the same week last year stocks were -75Bcf, with a five-year (2017-2021) average -168Bcf.

Broken down by region.

Current Storage Level vs. Last Year; 5-Yr

  • Current Storage Level: 2,470 Bcf
  • Storage 2021/Same Week: 2,205 Bcf
  • 5Yr Avg/Same Week: 2,019 Bcf
EIA Storage Report
us natgasl locations

Global Natural Gas Quick Overview

via @Ole_S_Hansen

Natural Gas Market Price Influence Factors

Bearish Factors Include

  • Economic damage and reduced natural gas demand caused by the Covid pandemic,
  • Warm U.S. winter that results in weak demand for natural gas for heating.
  • Over long spec positions
  • Freeport LNG Outage
  • Expectations that the high level of oil prices would increase shale drilling and natural gas extraction as a by-product.
  • The Gulf coast hurricane season looks to be quite inactive. The North Atlantic Ocean has experienced the quietest months of July and August since 1941. Named storms have skipped August in the Atlantic only three years on record: 1997, 1961, and 2022. (This is bullish or bearish depending on where the storm comes onshore)
  • ETF and derivative positioning

Bullish Factors Include

  • Record foreign demand for U.S. nat-gas flows to U.S LNG export terminals on April 18 rose to a record 11.921 bcf (data from 2014) and after U.S. LNG exporters loaded a record 81 cargoes in November, breaking the previous record of 75 set January of 2020, (This was before the Russian invasion of Ukraine – which has led to even greater demand for US LNG)
  • The lower level of oil prices and ESG politics reduced shale drilling and natural gas extraction as a by-product
  • Tighter U.S. natural gas supplies that are down -14.8% y/y and -2.6% below their 5-year average.
  • High power burns
  • Perception that gas supply and demand are more inelastic than ever before.
  • Over short spec positions
  • Discussion of a European gas price cap
  • ETF and derivative positioning

Rig Watch 

Baker Hughes active rigs total in the U.S. onshore and Gulf of Mexico (GOM)

  • US Baker Hughes Rig Count Feb-16:621 (prev 623)
  • Baker Hughes Rotary Gas Rigs Feb-16: 121 (prev 121)
  • Baker Hughes Rotary Oil Rigs Feb-16: 497 (prev 499)
  • Baker Hughes reported the number of active U.S. natural gas drilling rigs in the week ended February 16, 2024, remained unchanged at 121 rigs, just above the 19-month low of 113 rigs posted September 8, 2023. Active rigs last year fell back after climbing to a 4-year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
  • Haynesville up 1 to 43 vs 70 year ago
via @CelsiusEnergyFM Feb 9. Natgas prices are at 3 year lows & production is back to 105 BCF/d within 1.5 BCF/d of record highs—so it’s only natural that the Baker Hughes Rig Count would RISE by 4 rigs this week, the largest weekly increase since last September.

US Rigs w/w changes by key shale basins (prior Week)

  • Permian -1 to 306
  • Eagle Ford unchanged at 48
  • Williston unchanged at 34
  • Cana Woodford -1 to 21
  • DJ Niobrara unchanged at 12
  • Feb 16, 2024
Horizontal oil rigs in the Permian -2 to 294 Baker Hughes @staunovo Feb 16, 2024
  • Permian Basin rigs pulled off at the fastest pace in three years amid consolidation and slow return in oil demand.
  • Rigs targeting both crude and natural gas in the West Texas and southeast New Mexico region declined by 7 to 320 this week, according to data released Friday by Baker Hughes Co.
  • It’s the biggest weekly drop in the Permian since June 2020. – Bloomberg

Canada Rigs

  • Canada’s active rig count came in at 106 December 22, 2023, a decrease of 52 rigs compared to December 15. This is a large drop, but entirely expected in the lead-up to Christmas.
  • Alberta’s active rig count declined from 110 to 77, Saskatchewan’s rig count decreased to 6. BC’s active rig count settled at 23 compared to 26 earlier in the week.
  • Oil rigs decreased by 41 between December 15 and December 22.
  • Gas rigs decreased by 10, settling at 57 rigs.
  • The number of rigs classified as “Other” or “Unknown” held steady at 1 rig.
  • Today’s rig utilization rate is 29.5%, a decline from 43.4% at last week’s end.
  • The total number of rigs fell from 364 to 359, a 1.4% decrease. It is expected that the utilization rate will rebound strongly after the Christmas slowdown.
  • BOE Report

Talking About the Weather

Gulf of Mexico

Gulf of Mexico Live Weather Report

Summer Heat

This summer has again been dominated by record heat, which has seen a barrier to building storage inventories as intense heat in June and July has used up more gas for power generation. In Texas alone, the electric grid operator for 90% of the state, the Electric Reliability Council of Texas (ERCOT) has seen its peak power loads set fresh records.

La Nina

La Nina conditions through the summer and into next fall raise the likelihood of Atlantic hurricanes, which could disrupt natural gas operations on the Gulf Coast late in the summer and early fall. La Nina conditions tend to allow more tropical systems to strengthen into hurricanes. The phenomenon begins when the atmosphere reacts to a cooler patch of water over the Pacific Ocean.

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Hurricane Season

Hurricane Season

There have been four other times over the past 30 years in which the Atlantic basin has been devoid of named storm activity between July 3 and Aug. 3, 1993, 1999, 2000 and 2009, according to data analyzed by Colorado State University meteorologist Philip Klotzbach.

On average, there are 14 named storms in a hurricane season in the Atlantic Basin, according to data collected between 1991 and 2020, with the first hurricane typically recorded by Aug. 11, and the first major hurricane occurring by Sept. 1.

In the last two years the third month of hurricane season can be extremely active. Four named storms were spawned during the month of August in 2021, including the powerful Hurricane Ida that devastated communities from Louisiana to New Jersey at the tail end of the month. In 2020, the devastating Hurricane Laura made landfall along the Gulf Coast as a Category 4 storm, the 12th named tropical system of the season. And in 2019, Hurricane Dorian, one of the basin’s strongest-ever hurricanes, formed in late August before making its destructive landfall in the Bahamas on Sept. 1 of that year.

Paths of Recent Gulf Hurricanes

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Technical Analysis via KnovaWave 

Henry Hub Natural Gas Futures Weekly Chart Outlook via @knovawave

Natural gas futures Daily

Daily Shape: US Natural Gas futures are a great example of rebalancing mania. We have for the first time since last December got over the 50dma as we corrected the manic 5, and here we are back at it. Big levels in the week ahead. Under there support is the cloud and above confluence with the Kijun, Tenkan stalling the move higher. Much work to do as we sailed lower under the 61.8%.

Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. Resistance is heavy: 0/8 and above the March gap. Should it get going VPOC will fuel a move. If not 50dma and cloud support above previous lows, and which was also a major break up level. (The spheres of influence)

Weekly Shape:  Natural gas saw it’s first sign of life since breaking the weekly 50wma and the Kijun gave a kiss of death. This week we closed right back at the Tenkan after a 1-2 out of the sphere of influence. Support under previous lows. Above MML, Kijun, 50wma and fibs. Energy from flat Kijun and cloud twist has stalled for now, needing impulse to move and confirm1 higher. Recall the instability stems from the sharp reversal off the 5 over 8/8 indicative of speculative fervor like the previous impulsive spikes. Heavy resistance is the 1/8 Sphere (4 or IV). Bulls need all the damage down to be rebuilt. Kijun is major resistance given energy higher came from a clean break of the Kijun.

Natural Gas Technical Notes

  • Important to watch how this energy was built for shape correlation. The Cloud top broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. Prior to this move the adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60 last time which fueled this year’s move higher. From there we fell sharply to the Kijun, A completion of 4 (bear) or (i) of 5 (bull) which gave this move sustenance.
  • Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV (Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.
  • Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term. 
  • The key has been rebalancing which we also can see in option vol and spec v’s hedger blending. The natural gas rebalanced after continued to fail and retrace with impulse after reaching its major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence. A question of continuation with the 50wma as resistance and cloud as support.

Natural Gas Futures Performance

Natural Gas Futures Weekly Performance w/e 2/16/2024

Natural Gas Futures Quarterly and YTD Performance

The volatility of natural gas prices is legendary in the future’s world. Henry Hub was the worst performing future in the first quarter of 2023. In the second quarter of 2023 it was the best performing future.

  • Natural-gas prices on the New York Mercantile Exchange in the third quarter fell 4.34%
  • For the first six months of the year, it is still the worse performing commodity future for 2023, down 45.14%. (VIX was down 56.24%)
  • Natural-gas prices on the New York Mercantile Exchange lost 53% in the first three months of the year and fell to their lowest finish in about two-and-a-half years earlier in March.
  • Natural-gas prices on the New York Mercantile Exchange rose 31.89% in the second three months of the year.

Moving forward weather, ETF speculation and the strength of LNG demand will determine U.S. natural-gas prices. Remember natural gas prices are majority affected by domestic actions, for the US the variance is exports, that is Mexican pipelines, Canadian imports and LNG exports.

Q4 2023
Yearly Performance for 2023

European Energy Watch

Natural gas prices saw some violent few years in Europe. After being held hostage to the restricted flow of Nord Stream from Russia the energy crisis pounding the world with unheard of prices was impacting the domestic pricing. In Europe we saw record highs again but since then prices collapsed from newly sourced supply and less severe weather coupled with collapsing industrial demand.

Catalysts to watch:

  • Hotter or colder weather hitting demand.
  • Russia transfer, sanctions, cheating
  • German Industry
  • French Nukes
  • LNG
  • Norway supply
  • Putin constant threats

Into the Maelstrom – LNG and European Natural Gas Outlook for the Week Ahead:


  Natural Gas Production

US Natural gas production hits new high 105.80 – 12/20/23.

HFI Research @HFI_Research Feb 9, 2024

That rise in gas output is due primarily to increased interest in oil drilling in shale basins that also produce a lot of associated gas like the Permian in West Texas and eastern New Mexico. Chevron said it plans to raise capital expenditures in the Permian by 25% in 2024 from its annual guidance and aims for record output despite a more modest rig count plan for the oilfield. The No. 2 U.S. oil producer after ExxonMobil expects to average 13 to 14 company-operated rigs in 2024 in the basin, up from 2022 but fewer than previously anticipated.

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Around 97% of production over the next two years will come from the Lower 48 states (L48), excluding the Federal Offshore Gulf of Mexico (GOM). The other 3% will come from Alaska and the GOM.

U.S. natural gas production growth will primarily come from the Appalachia region in the Northeast, the Permian region in western Texas and southeastern New Mexico, and the Haynesville region in Texas and Louisiana. EIA forecast that the Permian region will contribute 2.2 Bcf/d to production growth in 2022 and 1.2 Bcf/d in 2023.

EIA

Natural Gas Demand Watch

EIA electricity data shows natgas powerburn has been bright for the sector, averaging up a strong +3.6 BCF/d over the past week. @CelsiusEnergyFM Dec 1
Not only has absolute natgas powerburn been strong, but coal-to-gas switching has surged ahead in recent weeks with the gas y-y share of fossil fuel (coal + gas) consumption nearing 10% vs 2022 and averaging up more than +7% over the past week. @CelsiusEnergyFM Dec 1

Natural Gas Exports Watch

US natural gas exports (pipeline and LNG) in billion cubic feet per day (EIA) @staunovo

LNG

Natural Gas to Feed to LNG Facilities

Sabine Pass, Cameron, Calcasieu Pass, Elba Island, Cove Point, Freeport & Corpus Christi combined.

Celsius Energy @CelsiusEnergyFM 11/2/23
Per today’s early-cycle pipeline data, LNG feedgas demand will rise to 14.8 BCF/d, up +3.2 BCF/d vs last year & right at the record high from April 16, 2023. Demand is being led by volumes to Freeport (95% capacity) & Calcasieu (99% capacity).

Freeport LNG

LNG feed gas averaged 12.8 billion cubic feet per day in the first six months of 2023, following the Freeport LNG terminal’s return to service.
Daily NG inflow to Freeport LNG.

Note: On Wednesday March 8, 2023, Freeport got final approval to restart its final train “The U.S. energy regulator on Wednesday granted Freeport LNG’s request to return to service the last of its three gas liquefaction units and phase 1 facilities.” The Freeport terminal accounted for around 20% of all U.S. natural gas exports before the explosion on June 8, 2022

  ++Charts via RonH @RonH999 – Visit Ron for daily updates 


US LNG Export Projects Vying for FID:

EIA: Natural gas demand from the seven operating U.S. LNG export projects and three more that have reached FID and under construction.

  • Corpus Christi Stage 3 — 10mtpa (mostly contracted)
  • Plaquemines — 10mtpa (mostly contracted)
  • Driftwood — 11mtpa (mostly contracted)
  • Cameron T4 — 6mtpa
  • Freeport T4 — 8.4mtpa
  • Commonwealth — 8.4mtpa
  • Rio Grande — 11mtpa
  • via BBG Stephen Stapczynski @SStapczynski
In 2023, 4 new liquefied natural gas export projects will likely come online worldwide, with a combined capacity of 1.0 billion cubic feet per day, which will be the lowest since 2013.

Natural Gas Mexican Exports Watch

US natural gas exports to Mexico established a new monthly record in June 2021 surpassing 7 Bcf/d from then March-to-date average exports to Mexico according to Wood Mackenzie. In the preceding five years, the average February-to-March growth rate was slightly above 4%.


 Natural Gas Canada Import Watch


Wind Generation

Wind generation yesterday was an exceptionally dismal 336.4 GWh. Not only was this down -75% vs last year, but it was also the 9th weakest wind generating day in the last 5 yrs, remarkable given the large increase in capacity in that time. This has significantly natural gas boosted powerburn. Jan 25, 2024 @CelsiusEnergyFM

Natural Gas Nuclear Power Watch

Source: via RonH Data ‏@ronh999

ALERT Three Mile Island nuclear shut down permanently on Friday afternoon 9/29/2019.


Natural Gas Options Structure – Volatility

NYMEX ON NATURAL GAS OPTIONS CommodityVol.com @CommodityImpVol

NYMEX ON = NATURAL GAS OPTIONS (Live Link)

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ETFs have a huge effect on natural gas price action, through option and futures expiration and pure speculation. There is HNU, HND, UNG, BOIL and KOLD that dominate.

Roll schedule for 2024 via @firstenercast

Natural Gas Futures Commitment of Traders (COT)

 Disaggregated Commitment of Traders (DCOT) via RonH Data ‏@ronh999 @ole_s_hansen

Latest ICE and CFTC Open Interest Data: 

Natural Gas DCOT futures only managed money traders WoW change

(Note at NG peak Highest Longs Ever 87% (since 2006) Lowest Longs 2020 24%)

  • For week ending Feb 13
  • Natural Gas DCOT futures only managed money traders 
  • WoW change.
  • +22,636 longs,
  • +56,064 shorts,
  • -33,428 net change,
  • 39.1% net long
NATGAS Volume & Open Interest options & futures on 09-Feb-2024 (PRELIMINARY) @buzzz00

COT on Commodities

COT on commodities in week to Feb 13, 2024: Energy: Crude oil long jumps 17%, partly offsetting wrong-footed sales the previous week. A 16% price slump drives Natgas short to a 2-yr high
Metals selling set up the end of week squeeze: Gold length cut 44% to a 4-mth low, Silver and Copper shorts doubled, Palladium short jumped 25% to new record. Grains: Corn and soybeans selling drive sector short to a fresh 2019 high at -604k Softs: Cocoa sold into parabolic rise, #cotton long jumps 54% to 21-mth high and #coffee to a 2-yr high via Ole S Hansen @Ole_S_Hansen

via Ole S Hansen @Ole_S_Hansen

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Understanding DCOT Reports

Read Understanding Commitments of Traders Reports – COT, TFF and DCOT  to help understand the disaggregated reports (DCOT) and how they break down the reportable open interest positions into four classifications:

1. Producer/Merchant/Processor/User 2. Swap Dealers 3. Managed Money 4. Other Reportables


Sources: TradersCommunity, EIA, RonH Energy, CommodityVol, Argus, KnovaWave

From The TradersCommunity US Research Desk