August Nymex natural gas (NGQ24) on Tuesday closed up by +0.030 (+1.39%).
Aug nat-gas prices settled moderately higher on Tuesday. Short covering emerged in nat-gas futures Tuesday on carryover support from a +4% rally in European nat-gas prices to a 1-week high. Weather forecasts are mixed for nat-gas, as NatGasWeather said Tuesday that much of the US west, south, and east will see very warm temperatures from July 23-31, but the central states should see seasonal temperatures.
On Monday, nat-gas prices sank to a 2-1/4 month low due to forecasts for cooler US temperatures that will reduce demand from electricity providers to run air conditioning. Also, current US gas supplies remain abundant as nat-gas inventories as of July 5 are +18.7% above their 5-year seasonal average.
Nat-gas prices have underlying support from the outlook for hot US temperatures this summer, which could boost nat-gas demand from electricity providers to power air conditioning. The National Weather Service (NWS) said on June 11 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 100.4 bcf/day (-0.3% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 82 bcf/day (+9.1% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 10.7 bcf/day (-4.0% 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 Wednesday that total US electricity output in the week ended July 6 rose +2.9% y/y to 92,792 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 6 rose +2.1% y/y to 4,146,741 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended July 5 rose by +65 bcf, above expectations of +58 bcf and above the 5-year average build for this time of year of +57 bcf. As of July 5, nat-gas inventories were up +9.2% y/y and were +18.7% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 80% full as of July 8, above the 5-year seasonal average of 70% 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 July 12 fell -1 rig to 100 rigs, just above the 2-3/4 year low of 97 rigs from June 28. Active rigs have fallen since climbing to a 4-3/4 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.
