September Nymex natural gas (NGU23) on Wednesday closed -0.063 (-2.46%).
Nat-gas prices Wednesday extended Tuesday's losses to a 2-1/2 week low on forecasts for cooler U.S. temperatures to reduce nat-gas demand from electricity providers to power air conditioning. Forecaster Atmospheric G2 said starting next week, at least two cold fronts will push southward into the lower 48 U.S. states, ushering in rounds of early-autumn-like air into the Plains, Midwest, Great Lakes, and Northeast.
Lower-48 state dry gas production on Wednesday was 99.8 bcf/day (+2.5% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 75.8 bcf/day, +5.1% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 11.8 bcf/day or -3.5% 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 91% full as of August 20, well above the 5-year seasonal average of 78% full for this time of year. U.S. nat-gas inventories as of August 11 were +10.8% above their 5-year seasonal average.
On August 9, nat-gas prices soared to a 5-3/4 month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Australia's LNG workers said a strike could occur as soon as September 2 if no deal is reached this week. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if workers strike. Australia is the world's third-largest liquified natural gas (LNG) exporter, accounting for 10% of global supplies.
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 August 19 rose +6.3% y/y to 92,153 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending August 12 fell -1.4% y/y to 4,068,042 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will climb +31 bcf.
Last Thursday's weekly EIA report of +35 bcf for the week ended August 11 was neutral for nat-gas prices since it was right on expectations. However, as of August 11, nat-gas inventories were up +21.7% y/y and +10.8% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended August 18 fell by -6 to a 1-1/2 year low of 117 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.
