July Nymex natural gas (NGN24) on Tuesday closed down sharply by -0.170 (-6.17%).
July nat-gas prices Tuesday relinquished early gains and closed sharply lower on negative carryover from a slump in European nat-gas prices. European nat-gas prices retreated from Monday's 6-month high Tuesday as supply concerns eased on expectations that an outage at Norway's Nyhamna gas processing plant will be short-lived. Nat-gas rallied sharply Monday due to worries that European demand for US gas supplies would surge after the unplanned outage at the Nyhamna gas processing plant cut gas supplies to Europe.
Nat-gas was also under pressure Tuesday after US weather forecasts turned cooler. The Commodity Weather Group said Tuesday that temperatures for the central and eastern US shifted slightly cooler for June 9-13.
The outlook for warm summer temperatures in the US is a bullish factor for nat-gas prices as the hot temperatures should boost nat-gas demand from electricity providers to power air-conditioning. Last Tuesday, the National Weather Service (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."
Lower-48 state dry gas production Tuesday was 97.8 bcf/day (-3.2% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 69.2 bcf/day (+5.4% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.1 bcf/day (+1.2% 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 last 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.
Last 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 70% full as of June 2, above the 5-year seasonal average of 58% 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 31 rose by +1 rig to 100, slightly above the 2-1/2 year low of 99 rigs posted in the week ending May 24. 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.
