Natural gas prices continued to drop this week as the market fundamentals remained bearish with strong production and light seasonal demand forecasted for the next couple of weeks. This week’s production estimates were near 105 BCF per day while pipeline nominations peg Bakken supply near all-time highs.
Moving forward, all eyes will be on the upcoming storage reports as cold temperatures across the US last week are expected to drop the surplus. Expectations for tomorrow’s report are wide ranging as they could be a withdrawal of 16 BCF to 134 BCF. One year ago, the draw was 30 BCF while the 5-year average sat at 48 BCF. Traders expect the surplus to widen back out in the upcoming weeks with the mild weather that is projected. Currently inventory levels sit at 3.836 TCF which is 341BCF above last year and 303 BCF above the 5-year average.
Crude oil continues to be volatile with upside risk coming from unrest in the Middle East while stronger US production and economic weakness in China threaten another drop.
The latest rig count data from Baker Hughes showed an increase of three total rigs last week. Oil rigs rose by five while gas and miscellaneous rigs fell by one each. The total rig count now sits at 625 rigs compared to 784 rigs seen one year ago.
This week’s additional graphic from the EIA shows where the liquified natural gas terminals in Northern Africa and the Middle East are located. In 2022 this region accounted for approximately 29% of the global LNG exports. LNG exports have been on decline in this region due to the growth in exports from countries such as the United States and Australia. For reference North African and Middle Eastern LNG exports accounted for about 47% of global exports in 2013.