October Nymex natural gas (NGV23) on Thursday closed +0.069 (+2.75%).
Nat-gas prices on Thursday rebounded from a 2-week low and rallied moderately on a smaller build in weekly supplies after EIA nat-gas inventories rose +33 bcf, below expectations of +41 bcf.
Nat-gas prices Thursday initially fell to a 2-week low on forecasts for cooler-than-normal U.S. temperatures that would reduce nat-gas demand from electricity providers to run air conditioning. The Commodity Weather Group said normal to below-normal temperatures are seen in the eastern two-thirds of the U.S. from September 11-20.
Lower-48 state dry gas production Thursday was 100.6 bcf/day (+1.7% y/y), according to BNEF. Lower-48 state gas demand Thursday was 74.4 bcf/day, +3.6% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Thursday were 12.7 bcf/day or -2.4% w/w.
On August 9, nat-gas prices soared to a 6-month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Australia's LNG workers threaten two weeks of 24-hour rolling outages at two major export plants beginning September 14 if no deal is reached. 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.
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 92% full as of September 5, well above the 5-year seasonal average of 82% full for this time of year. U.S. nat-gas inventories as of September 1 were +7.6% above their 5-year seasonal average.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total U.S. electricity output in the week ended September 2 fell -1.4% y/y to 87,392 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending September 2 fell -1.2% y/y to 4,075,083 GWh.
Thursday's weekly EIA report of +33 bcf for the week ended September 1 was bullish for nat-gas prices since it was below expectations of +41 bcf and well below the 5-year average for this time of year at +60 bcf. As of September 1, nat-gas inventories were up +16.9% y/y and were +7.6% 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 1 fell by -1 to a 19-month low of 114 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.
