Market Updates

Market Update: December 20, 2023

Natural gas prices seemed to stabilize a bit this week as some analysts believe that we may be close to a floor. Over the last few weeks, a barrage of warmer weather maps and record production have kept bullish investors at bay. The January contract traded down nearly 40% from November 1st. One analyst at EBW Analytics Group believes “the long-term fundamental outlook remains oversupplied.” He goes on to say concerning the January contract that it “has long been technically oversold and soaring speculator short exposure raises short squeeze fears.”

The latest storage report from the EIA stated a draw of 55 BCF bringing the inventory levels to 3.664 TCF. That level is 245 above last year and 260 BCF above the 5-year average.

NYMEX Natural Gas Futures

Electric Pricing Forward Calendar Strips

Working gas in underground storage compared with the 5-year maximum and minimum | EIA

Temperature Outlook: December 27-Jan 2, 2023 | NOAA

Crude oil rebounded this week as Houthi rebel attacks in the Red Sea have caused enough supply disruptions to have an impact. BP and other shippers are pausing current oil shipments through the Red Sea and the Bab-el-Mandeb Strait, which are used to access the Suez Canal. Using a different route will increase costs as roughly 12% of the seaborne global trade run through the Red Sea. The US is reporting that a multinational naval force will soon be protecting the shippers.

According to Baker Hughes total rig counts fell by three in the latest report. Oil rigs fell by two, miscellaneous rigs fell by one and gas rigs were unchanged. The total rig count now sits at 623 rigs compared to last year’s total of 776 rigs.

This week’s additional graphic from the EIA illustrates the growth of associated natural gas in three of the oil plays in the Permian Basin. Associated gas is natural gas that is produced predominantly from oil wells. In the three fields analyzed, associated natural gas accounted for 13.7 BCF per day in the first seven months of 2023. During that time frame in 2018, associated natural gas accounted for only 4.7 BCF per day.

Annual associated natural gas production and gas-to-oil ratio from oil wells in the three major oil plays in the Permian region (2013-2023) | EIA

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