Market Update: May 17, 2023

Natural gas prices regained some footing this week after cooler temperatures in the northeast and midcontinent lifted cash prices from the prior week lows. Additional support also came in the form of a surprise drop of sixteen rigs in the latest gas rig count. Lower gas prices this year have signaled to production company executives the need to slow drilling activity, but analysts warn that a drop in the rig count could take weeks or even months before lower production is felt by the market. It is also important to note that several key fundamentals remain bearish as demand remains light, storage remains healthy and LNG exports continue to be soft.

In the latest storage report produced by the EIA an injection of 78 BCF was stated bringing the inventory level to 2.141 TCF. This level places storage 509 BCF over last year and 332 BCF over the 5-year average.

Crude oil traded back down near the $70.00 mark as some jitters returned to this market after yesterday’s retail sales report came in weaker than expected. The weaker report suggests to some traders that the upcoming summer driving season could experience lighter demand than some had originally hoped.

Baker Hughes reported in the latest rig count report that total rigs fell by seventeen rigs bringing the total to 731 rigs. One year ago, the total rig count stood at 714 rigs.

This week’s additional graphic from the EIA illustrates the natural gas storage situation in Europe and shows the strong inventory recovery that took place from the anemic levels seen just one year ago. At the end of the latest winter withdrawing season, storage was 56% full which is the highest level on record ending a heating season. According to NOAA this past winter was Europe’s second warmest winter with January registering as the warmest January on record.