Market Update: September 13, 2023

Natural gas prices traded up this week testing the upper band that we have seen for the past couple weeks. That contract traded down to a three-month low last week as temperatures began to drop, reducing heating demand for much of the country. The expected demand decline for electric generation this week may be around 20 BCF. Although the storage surplus has been reduced significantly over the past several weeks, healthy inventory levels and production appear to be keeping a ceiling on this market for the moment.

The latest storage report from the EIA stated a build of 33 BCF bringing the new inventory level to 3.148 TCF. That level is still 462 BCF over last year and 222 BCF over the 5-year average.

Crude oil remains strong edging closer to $90 per barrel as some analysts believe that we are seeing the effects of the OPEC plus production cuts and the drop in the US rig count over the last few months. It is also important to note that the US Strategic Petroleum Reserve is at levels not seen since 1985.

The latest rig count from Baker Hughes finally showed a net increase of one rig last week. Oil and miscellaneous rigs both rose by one rig while natural gas rigs fell by one. The total rig count now sits at 632 rigs which is 127 rigs below last year.

This week’s additional graphic from Baker Hughes shows the rig count data from the last several months. Each week we mention the weekly change to the rig count because it is an important piece to the supply/demand puzzle for the gas and oil markets. This week I wanted to show multiple weeks of data to emphasize just how far the rig counts have dropped over the summer.