Natural gas prices continued to struggle this week as warmer than average probabilities remain in the forecast along with very healthy production figures. Many analysts were surprised to see weather models not only hold onto the warm forecast through the weekend, but to make them warmer on Monday morning. The above normal forecast is now scheduled to go through the Christmas holiday.
Bearish pressure is also coming from very strong production volumes. According to Wood Mackenzie production estimates are near 107 BCF per day through the weekend and into Monday. They estimate the 30-day average to be 105.5 BCF compared to 100.7 BCF one year ago. It remains to be seen what kind of an impact the sharp price drop will have on production going forward. The latest storage report from the EIA stated a draw of 117 BCF placing inventory levels at 3.719 TCF. This level is approximately 254 BCF higher than last year and 234 BCF above the 5-year average. The surplus could likely expand over the next few weeks with the above normal weather expectations.
Crude oil futures traded below $70 last week as demand concerns in China coupled with strong US production keep downward pressure in play. The US Department of Energy announced Friday that it will be working to replenish the Strategic Petroleum Reserve through May. The department considers anything below $79 per barrel a good deal for taxpayers.
According to Baker Hughes total rig counts rose by one to 626 rigs. Oil rigs fell by two while gas rigs rose by three. One year ago, the total rig count sat at 780 rigs.
This week’s additional graphic takes a snapshot of natural gas inventories after injections seasons from 2014. This year the United States ended the injection season with 3.776 TCF. This is the highest inventory level since 2020.