June Nymex natural gas (NGM23) on Thursday closed down -0.091 (-3.79%).
Jun nat-gas Thursday fell to a 1-1/2 week low and closed moderately lower as updated U.S. weather forecasts turned cooler, curbing nat-gas demand from electricity suppliers to power air conditioning. Forecaster Atmospheric G2 said temperatures across the eastern half of the U.S. are expected to be above average next week but will likely turn cooler the following week. Nat-gas prices were also weighed down on negative carryover from Thursday's plunge in European gas prices to a 23-month low.
Reduced Canadian gas output is bullish for prices as wildfires in Alberta have halted nat-gas production in western Canada for several Canadian nat-gas producers. The total number of wildfires in Alberta stood at 67 Wednesday afternoon, with 17 still considered out of control. However, that is down from 93 fires last Friday, with cooler temperatures and rain expected to provide further relief in the days ahead.
Nat-gas prices fell sharply starting in December and posted a 2-1/2 year nearest-futures low (NGK23) Apr 14 as abnormally mild weather across the northern hemisphere this past winter eroded heating demand for nat-gas. January was the sixth-warmest across the contiguous 48 U.S. states in data from 1895. This winter's warm temperatures have caused rising nat-gas inventories in Europe and the United States. Gas storage across Europe was 66% full as of May 21, well above the 5-year seasonal average of 47% full for this time of year. Nat-gas inventories in the U.S. were +17.8% above their 5-year seasonal average as of May 12.
Lower-48 state dry gas production on Thursday was 99.8 bcf (+3.8% y/y), just below the record high of 101.7 bcf posted on Apr 23, according to BNEF. Lower-48 state gas demand Thursday was 65.2 bcf/day, up +6.1% y/y, according to BNEF. On Thursday, LNG net flows to U.S. LNG export terminals were 12.8 bcf, up +0.6% w/w. On Apr 16, LNG net flows to U.S. LNG export terminals rose to a record 14.9 bcf/day as nat-gas exports continue to increase from the Freeport LNG terminal as the terminal was partially reopened after being closed since last June because of an explosion.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended May 20 fell -7.3% y/y to 74,044 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending May 20 was unchanged y/y to 4,093,486 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices since it showed U.S. nat gas inventories rose +96 bcf, below expectations of +100 bcf but right on the five-year average for this time of year. Nat-gas inventories as of May 19 are +17.0% above their 5-year seasonal average.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended May 19 was unchanged at a 13-month low of 141 rigs, moderately below the 3-1/4 year high of 166 rigs posted in the week ended Sep 9. 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.
