Market Update: February 28, 2024

The March natural gas contract traded down this week but rebounded afterward. Weather forecasters continue to predict warm weather patterns that are expected to bring lighter than normal heating degree days for this time of year.

Daily production was down to 103 BCF per day this week. Production hit record levels earlier this year near 107 BCF per day while levels from one year ago were roughly 100 BCF per day.

Futures rallied last week as Chesapeake Energy Corporation announced potential production cuts of up to 30% as prices have recently fallen to 3.5-year lows. Some analysts believe that other producers may follow this direction.

The latest storage report from the EIA stated a draw of 60 BCF which fell within expectations. This report also stated a 5 BCF revision from last week lowering current levels. The current inventory level now sits at 2.470 TCF which is 12 percent higher than last year and over 22 percent higher than the 5-year average.

The latest rig count from Baker Hughes reported a five-rig increase bringing the new total to 626 rigs. Oil rigs increased by six while gas rigs fell by one. One year ago, the total rig count sat at 753 rigs.

This week’s additional graphic from the EIA illustrates the power generation stack in the US for 2023. Natural gas was the largest source of generation at 43 percent while nuclear generation came in at 18 percent followed by coal at 16 percent. Natural gas generation continues to grow as nearly all gas fired plants are dispatchable, meaning that they are reliable to meet grid demand when called upon.