Market Update: October 18, 2023

Natural gas prices dropped this week. Rebounding domestic production and mild fall weather demand have some analysts talking about the possibility of an increase in the storage surplus as we near the end of injection season. Cash prices in the midcontinent also tumbled on Friday causing some bullish investors to think twice about futures prices going forward. OGT and Southern Star saw the largest drop in daily settles over the weekend in the midcontinent at $1.73 and $1.69 respectively.

The latest storage report from the EIA once again shrunk the inventory surplus as an 84 BCF injection was stated. This injection brings the current inventory level to 3.529 TCF which is 316 BCF above last year and 163 BCF above the 5-year average.

Crude oil moved back up this week as conflict in the Middle East and tight global supplies continue to be drivers. If Iranian sanctions come to fruition due to their involvement with Hamas, the Biden administration could look to reduce Venezuelan sanctions if “fair” elections are seen in 2024. One analyst sees this as a potential buffer to the war related premium currently seen in Gaza.

According to Baker Hughes the total rig count rose last week by three rigs bringing the new total to 622 rigs. Oil rigs rose by four while gas rigs dropped by one. One year ago, the total rig count sat at 769 rigs.

This week’s additional graphic from the EIA’s Short-Term Energy Outlook: Winter Fuels Outlook, analyzes the expected energy costs this winter for US households. They expect wholesale gas prices to be off about 14% this winter compared to last winter. They believe that this could lead to lower retail natural gas prices for households of nearly 21%. Strong production and healthy storage are reasons for the decline.