October Nymex natural gas (NGV23) on Thursday closed +0.028 (+1.04%).
Nat-gas prices on Thursday climbed to a 1-1/2 week high and settled moderately higher. Forecasts for hot U.S. temperatures next week that will boost nat-gas demand from electricity providers to run air conditioning pushed prices higher. The Commodity Weather Group said above-average temperatures will be seen in the central U. S. next week. Nat-gas prices fell back from their best levels Thursday after weekly EIA nat-gas inventories rose +57 bcf, above expectations of +50 bcf.
Nat-gas prices also have support from labor unrest in Australia. LNG workers at key Chevron sites in Australia began partial strikes last week after talks with management failed to reach an agreement. Workers said they will stop work completely for two weeks starting this Thursday if no deal is reached. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if Australian strikes reduce Australian LNG production. Australia is the world's third-largest liquified natural gas (LNG) exporter, accounting for about 10% of global supplies last year.
Lower-48 state dry gas production Thursday was 100.0 bcf/day (+0.9% y/y), according to BNEF. Lower-48 state gas demand Thursday was 68.1 bcf/day, +6.5% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Thursday were 12.3 bcf/day or -5% w/w.
Nat-gas prices continue to be undercut by high inventories caused by weak heating demand during the abnormally mild winter. This past winter's warm temperatures caused nat-gas inventories to rise in Europe and the United States. Gas storage across Europe was 94% full as of September 10, well above the 5-year seasonal average of 83% full for this time of year. U.S. nat-gas inventories as of September 8 were +6.8% above their 5-year seasonal average.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended September 9 rose +8.4% y/y to 90,200 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending September 9 fell -1.1% y/y to 4,082,083 GWh.
Thursday's weekly EIA report of +57 bcf for the week ended September 8 was bearish for nat-gas prices since it was above expectations of +50 bcf, although below the 5-year average for this time of year at +76 bcf. As of September 8, nat-gas inventories were up +15.7% y/y and were +6.8% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Friday the number of active U.S. nat-gas drilling rigs in the week ended September 8 fell by -1 to a 19-month low of 113 rigs. Active rigs rose to a 4-year high of 166 rigs in September 2022. Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
