As we approach the winter heating season, the U.S. continues to have higher than normal natural gas in storage. These levels of storage have pushed producers to reduce rig count in an effort to bring prices up to a more profitable level.

Domestic Demand

Total U.S. natural gas consumption decreased by 3.0 percent (2.2 billion cubic feet per day (Bcf/d) compared to the previous report week. This decline was partly due to milder weather forecasts, which reduced the need for cooling power generation that heavily relies on natural gas, leading to a 7.7 percent (3.2 Bcf/d) drop in natural gas used for power generation. In contrast, consumption in the industrial sector saw a slight increase of 1.2 percent (0.3 Bcf/d), while consumption in the residential and commercial sectors increased by 9.6 percent (0.8 Bcf/d).

The U.S. is expected to experience a La Nina event this fall that can last this January to March. Typically, this weather pattern brings warmer and drier conditions to the southern U.S., while the northern regions and Canada experience colder and wetter weather.

International Demand  

Since the invasion of Ukraine, Russian gas exports to Europe have sharply declined due to the suspension of pipeline shipments to nearly all European countries, with plans to phase out all natural gas exports from Russia by 2027. The expanding global liquefied natural gas (LNG) market has enabled European countries to source natural gas from alternative producers, including the U.S. Previously, Russia supplied about one-third of Europe’s gas and was its largest single supplier. However, last year, Russian exports had diminished to just 25.1 billion cubic meters (bcm) of Europe’s total supply.

Along with the EU's changing natural gas suppliers, the U.S. Energy Information Administration's (EIA) newest LNG report predicts North America will more than double its LNG export capacity between 2024 and 2028. This growth is expected to increase from 11.4 Bcf/d in 2023 to 24.4 Bcf/d, provided ongoing construction projects proceed on schedule.

Production & Supply  

As of September 6, 2024, natural gas storage reached 3,387 billion cubic feet (Bcf), reflecting a net increase of 1.2 percent from the previous week. Current stocks are 6.9 percent higher than at the same time last year and 9.6 percent above the five-year average of 3,091 Bcf. Additionally, the average rate of injections into storage during the current refill season (April through October) is 22 percent below the five-year average.

On Tuesday, September 3, the number of natural gas rigs fell by 16.8 percent from the previous year, totaling 94 rigs. Simultaneously, the overall rig count, which includes both natural gas and oil rigs, dropped to 582—a decrease of 22.6 percent from the previous year. This reduction underscores a broader trend of declining drilling activity across the industry.

This month represents the typical peak of the Atlantic hurricane season. While none of the current systems pose an immediate threat to land, the National Hurricane Center has advised that all should be monitored for potential tropical development. Forecasters are particularly focused on a system near the southeast U.S. coast, which could develop early this week and potentially disrupt natural gas production. As of Wednesday, the probability of this system forming within the next seven days is estimated at 20 percent.

‍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.

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