October Nymex natural gas (NGV24) on Wednesday closed down by -0.058 (-2.63%).
Oct nat-gas prices Wednesday fell back from a 1-1/2 week high and settled moderately lower. A slump in European nat-gas prices to a 1-month low Wednesday sparked long liquidation in US nat-gas futures. Nat-gas prices also fell on forecasts for seasonal temperatures for most of the US over the next ten days, reducing nat-gas demand from electricity providers to power air conditioning.
Nat-gas prices Wednesday initially climbed to a 1-1/2 week high on positive carryover from Saturday when the US Department of Energy awarded a five-year LNG export license to New Fortress Energy to sell gas to countries that do not have a free trade agreement with the US. Since January, this is the first time that the Energy Department has granted an LNG export license and is supportive of prices since an increase in LNG exports could reduce US nat-gas supplies and shrink elevated inventories.
Last Wednesday, nat-gas prices sank to a 4-month low due to robust supplies and forecasts for moderate temperatures that will reduce nat-gas demand. US nat-gas supplies as of August 23 were +12.1% above their 5-year average.
Lower-48 state dry gas production Wednesday was 100.2 bcf/day (-2.2% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 71 bcf/day (+2.1% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 13 bcf/day (+17.6% w/w), according to BNEF.
A decline in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US electricity output in the week ended August 24 fell -7.76% y/y to 88,308 GWh (gigawatt hours), although US electricity output in the 52-week period ending August 24 rose +1.65% y/y to 4,143,350 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will climb by +27 bcf for the week ended August 30, below the five-year average of 51 bcf for this time of year.
Last Thursday's weekly EIA report was neutral for nat-gas prices since nat-gas inventories for the week ended August 23 rose +35 bcf, right on expectations but below the 5-year average build for this time of year of +43 bcf. As of August 23, nat-gas inventories were up +7.0% y/y and were +12.1% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 91% full as of August 21, above the 5-year seasonal average of 83% 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 August 30 fell by -2 rigs to a 3-1/3 year low of 95 rigs. Active rigs have fallen back since posting a 5-year high of 166 rigs in Sep 2022, up 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.
