We are finishing the year with record-high storage levels which has continued to put downward pressure on natural gas prices.

Domestic Demand

Thanks to warmer weather in most states, Americans used almost 10 percent less natural gas than the previous week. The U.S. total demand for natural gas this week is at 118.1 billion cubic feet (Bcf) which is only a 2.7 percent increase from last year's, 114.9 Bcf. Looking forward, December will likely remain warm, so we do not expect a big need for heating. However, as we move further into winter, weather can be unpredictable, as we saw last year with Winter Storm Elliot.

International Demand

Even though Europe recently experienced cold weather, natural gas prices are expected to continue falling next year because of low demand and ample inventories resulting from a mild fall that delayed the heating season. After the pandemic, Europe has faced many challenges to its energy infrastructure, with natural gas prices reaching all-time highs last year as the continent reduced its dependency on natural gas from Russia.  Looking forward, Europe’s reliance on importing liquified natural gas (LNG) brings with it some risks of geopolitical issues in the Middle East and competition with Asia.

Chesapeake Energy Corp., an American exploration and production company, aims to sell more natural gas globally. Currently, Chesapeake has deals to supply up to 3 million tons annually and wants to increase to 4 million tons. By working with Asian and European countries, the company aims to reduce reliance on U.S. prices. This could bring more competition for U.S. gas, potentially impacting prices, depending on Chesapeake's international success and global gas price trends.

Production & Supply

The U.S. has the highest amount of natural gas in storage since 2020. Particularly, warmer weather this winter reduced the need for gas heating, leading to a 6.7 percent increase in storage compared to the usual previous years. The U.S. total working gas is at 3,719 Bcf which is well above the five-year average. This surplus is pushing down natural gas prices, and there is an expectation of continued low demand this month.

At the beginning of 2023, 158 natural gas-directed rigs were active in the U.S. Since then, producers have drastically cut rigs to create stability between production and natural gas prices. As of November 28th, the rig count in the U.S. was 116, almost a 30 percent drop from the beginning of the year.

If you have any questions about the information in this newsletter or would like to talk to someone about your natural gas, please call your sales representative.