Natural gas prices tumbled last week as the relatively short-lived winter storm Gerri was replaced with warmer weather expectations. The 8–14-day temperature outlook produced by NOAA is forecasting above normal temperatures for most of the lower 48 states well into the first week of February. Recovering production, specifically Permian output which showed the steepest drop, is also contributing to the bearish sentiment as it is nearly back to healthy 30-day average levels.
The latest storage report from the EIA stated a draw 154 BCF which was in line with expectations. Current inventory levels now sit at 3.182 TCF which is 350 BCF above last year and 320 BCF above the 5-year average. The next storage report due out on Thursday is projected to surpass the 300 BCF withdrawal mark for only the third time in the last 14 years.
Crude oil continues to trade near the $75.00 level as some oil tankers continue to reroute due to concerns over further Houthi attacks. Uncertainty also remains as a Russian fuel terminal in the Baltic seas was attacked by a Ukrainian drone strike.
The latest rig count from Baker Hughes showed a net increase of one rig bringing the new total to 620 rigs. Oil rigs fell by two while gas rigs rose by three. One year ago, the total rig count sat at 771 rigs.
This week’s additional graphic from S&P Global Commodity Insights depicts the recent drop and recovery of US dry gas production. US production has been near record highs in November and December but tapered off significantly over the Martin Luther King holiday. For the week ending January 19th, US production averaged 94 BCF per day compared to a 103 BCF average for the week prior. Imports from Canada were up around 2.4 BCF per day last week partially offsetting the production drop.