Market Update: July 26, 2023

Natural gas prices remained supported this week by hot temperatures leading to stronger demand from the power sector. The US is currently on pace to set a new monthly power demand record averaging roughly 46.6 BCF per day in July. The previous record of 45 BCF per day was set last July. The stronger power demand is expected to impact the next few storage reports from the EIA by eating into the healthy storage surplus. It remains to be seen how much of an impact this will have on the market as production remains very strong and thus far has been able to absorb any bounces in demand. According to market data from Refinitiv Eikon, spot prices at Henry Hub fell between the months of January and June of 2023. Record production, mild temperatures and robust storage were reasons for the drop.

The latest EIA storage report stated a build of 41 BCF bringing the new inventory level to 2.971 TCF. This level is still 24 percent over last year and 13.8 percent over the 5-year average.

Crude oil along with gasoline prices at the pump are on the move upward as the oil rig count continues to fall and the Strategic Petroleum Reserve (SPR) remains near historic lows. Baker Hughes reported a drop of six rigs to the total rig count in its report last week. It is important to note that oil rigs fell by seven to 530 rigs. At the beginning of 2023 oil rigs alone sat at 618 rigs. Oil rigs have fallen in twenty-three of the first twenty-nine weeks of the year with one week remaining unchanged. The lack of investment has presumably been the cause for the large rig decline this year. The SPR also sits at 346.8 million barrels which is about 133.4 million barrels lower than one year ago. The August crude contract rolled off the board last week at $75.63.

This week’s additional graphic from the EIA shows forecasted natural gas prices at the Henry Hub from the Short-Term Energy Outlook. The EIA is projecting prices to rise through December to average $2.83 for the year.