July Nymex natural gas (NGN24) on Thursday closed down -0.094 (-3.53%).
July nat-gas prices Thursday dropped to a 2-week low and closed moderately lower after weekly nat-gas inventories rose more than expected. The EIA reported Thursday that nat-gas inventories for the week ended May 24 rose +84 bcf, above expectations of +78 bcf. A mixed weather outlook also undercut nat-gas prices after NatGasWeather said the eastern part of the US is expected to see moderate temperatures from June 6-13, which would curb nat-gas demand from electricity providers to power air-conditioning.
Tuesday's projection from the National Weather Service (NWS) is supportive for nat-gas prices as the NWS said that "the vast majority of the lower 48 US states could see above-average temperatures for the next three months, and for a good portion of states, a hotter-than-normal summer is the most likely scenario."
Nat-gas prices have rebounded higher to a 4-1/2 month high last Thursday from the 3-3/4 year nearest-futures low (NGK24) posted on April 26. Nat-gas prices collapsed over the winter and early spring after unusually mild winter temperatures curbed heating demand for nat-gas and pushed inventories well above average.
Lower-48 state dry gas production Thursday was 99.7 bcf/day (-1.5% y/y), according to BNEF. Lower-48 state gas demand Thursday was 64.4 bcf/day (-1.8% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 13.7 bcf/day (+6.1% w/w), according to BNEF.
An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total US electricity output in the week ended May 25 rose +12.71% y/y to 81,411 GWh (gigawatt hours), and US electricity output in the 52-week period ending May 25 rose +0.53% y/y to 4,112,114 GWh.
Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 24 rose by +84 bcf, above expectations of +78 bcf but below the 5-year average build for this time of year of +104 bcf. As of May 24, nat-gas inventories were up +14.3% y/y and were +26.5% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 69% full as of May 27, above the 5-year seasonal average of 56% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending May 24 fell by -4 rigs to a 2-1/2 year low of 99 rigs. Active rigs have fallen since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era 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.
