Market Update: October 11, 2023

Natural gas prices rallied this week fueled by a shrinking storage surplus in the US and colder weather patterns. The nearly 15% rally drove temperatures to levels not seen since mid-January.

The conflict in Israel is also putting a spotlight back on LNG and global supply levels. European prices jumped over 15% on Monday as Chevron was forced to stop natural gas operations at their Tamar offshore operation in the Eastern Mediterranean Sea. There is no timetable for return as conflict ramps up in the Gaza Strip.

The latest EIA report showed a build of only 86 BCF last week bringing the latest storage level to 3.445 TCF. That level is now only 172 BCF higher than the 5-year average and 357 BCF higher than last year.

Crude oil prices were on a steady slide last week before the chaos in Israel forced them to reverse course. With conflict in the Middle East, typically comes uncertainty in oil markets and this time is no exception. If Iranian involvement with Hamas is confirmed this could pressure the US into enforcing sanctions on Iran which may further support oil prices.

According to Baker Hughes the total US rig count fell by four last week to 619 rigs. One year ago, the total rig count sat at 762 rigs. Oil rigs fell by five, miscellaneous rigs fell by one and gas rigs rose by two.

This week’s additional graphic from the EIA highlights the growth of natural gas exports in the United States over the last ten years. LNG drove the export growth as it averaged 11.6 BCF per day over the first half of 2023. Pipeline exports to Mexico and Canada averaged 8.8 BCF per day over the same timeframe.