Natural gas prices remained soft this week. The market has continued to experience downside pressure as mild shoulder season weather has significantly taken a toll on demand. According to S&P Global May demand is forecast to be off nearly 5 BCF per day from April as residential demand is expected to be the key contributor to the drop. LNG demand is currently forecast to be just under 13 BCF per day, which assumes that the Freeport facility will be operating at full capacity.
Healthy storage and production are also keeping prices in check as the latest inventory report from the EIA noted that storage rose by 79 BCF in the prior week increasing the surplus to both the previous year and the 5-year average. The current level of 2.009 TCF is 35% above last year and 22% above the 5-year average.
Crude oil has fallen back off from last month’s price spike brought on by the one million barrel per day production cut announced by OPEC plus. This market is also feeling the same pressure that most energy markets are experiencing as global interest rate hikes could increase the probability of a widespread recession. The US Federal Reserve and the European Central Bank are expected to raise rates this week while the Bank of England is projected to do the same next week.
Baker Hughes reported in their latest rig count that the total rig count rose by two this week to 755 rigs. Both new rigs were gas. One year ago, the total rig count sat at 698 rigs.
This week’s additional graphic from the EIA illustrates winter natural gas withdrawals over the last ten winters. The most recent winter heating season saw 1,707 BCF of natural gas withdrawn, which is less than the previous seven winters. It is interesting to note that the record low for winter withdrawals occurred in winter 2015-2016 when 1,457 BCF was pulled from storage.