May Nymex natural gas (NGK23) on Wednesday closed down -0.191 (-8.28%).
May nat-gas prices Wednesday fell sharply to a 1-1/2 week low on ample supplies and soft demand. Also, forecasts for above-normal U.S. temperatures that will curb heating demand for nat-gas are undercutting prices after Atmospheric G2 said above-normal temperatures over the interior West are seen spreading to the northern and central U.S. at the end of next week. Nat-gas prices were also under pressure Wednesday on negative carryover from a fall in European nat-gas prices to a 5-week low.
Nat-gas prices have fallen sharply over the past three months 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 58% full as of Apr 23, far above the 5-year seasonal average of 38% full for this time of year. Nat-gas inventories in the U.S. were +20.5% above their 5-year seasonal average as of Apr 14.
Lower-48 state dry gas production on Wednesday was 99.4 bcf (+4.7% y/y), just below the record high of 101.7 bcf posted on Sunday, according to BNEF. Lower-48 state gas demand Wednesday was 71 bcf/day, down -1.1% y/y, according to BNEF. On Wednesday, LNG net flows to U.S. LNG export terminals were 13.6 bcf, up +0.2% 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 Apr 22 fell -2.3% y/y to 69,355 GWh (gigawatt hours). Although, cumulative U.S. electricity output in the 52-week period ending Apr 22 rose +0.8% y/y to 4,107,335 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to increase by +74 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories rose +75 bcf, above expectations of +70 bcf. Nat-gas inventories are +20.5% 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 Apr 21 rose by +2 to 159 rigs, just 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.
