Market Update: August 23, 2023
Natural gas prices returned to the familiar trading range that we have witnessed for much of the summer. Last week there appeared to be some hope from bullish investors as multiple production companies in Australia deal with potential worker strikes. Strikes would limit LNG production from that country and reduce global supply. Gas markets in Europe jumped as several benchmarks such as the Dutch TTF spiked on the news. The strike will probably have a limited short-term impact on US markets as LNG exports from the US are currently near capacity.
Another expected hot week is also causing the market to keep an eye on power demand as record burns are expected in the Midwest. According to the EIA current inventory levels sit at 3.065 TCF after last week’s storage injection of 35 BCF. The latest injection puts inventory at 549 BCF above last year and 299 BCF above the 5-year average. Although the 5-year average surplus has shrunk in recent weeks, strong production is preventing a further decline in inventory levels.
Crude oil moved back over the $80.00 mark again last week as bullish investors highlight a possible global shortfall with OPEC plus cuts and a depleted strategic petroleum reserve in the US. Bearish investors point to a struggling Chinese economy leading to weaker demand. The September contract rolled off the board yesterday at $80.35.
The latest rig count from Baker Hughes stated a drop of twelve rigs bringing the total rig count to 642 rigs. The drop consisted of five oil rigs, six gas rigs and one miscellaneous rig. One year ago, the total rig count sat at 762 rigs.
This week’s additional graphic from the EIA highlights basis spreads in Texas versus the Henry Hub. The discount began to narrow in February of 2023 as both the Freeport facility and EPNG company’s 2000 line returned to service. Production also grew at a slower pace in 2023 than it did in 2022.
