September Nymex natural gas (NGU23) on Wednesday closed +0.182 (+6.55%).
Nat-gas prices Wednesday extended this week's sharp rally to a 5-1/2 month high on the outlook for excessive heat in the U.S. to boost nat-gas demand from electricity providers to power air conditioning. Forecaster Maxar Technologies said near-record heat will persist throughout the Southwest through August 18, with above-normal temperatures spreading into the East and Midwest August 19-23.
Gains in nat-gas prices accelerated Wednesday when European nat-gas price surged more than +28% to a 1-3/4 month high after LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Inspired Plc predicts Asian LNG buyers "are likely to bid up LNG imports" to replace Australian volumes if workers strike. Australia is the world's third-largest exporter of liquified natural gas (LNG).
Lower-48 state dry gas production on Wednesday was 100.0 bcf/day (+2.5% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 74.6 bcf/day, -4.8% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 12.1 bcf/day or -3.4% w/w.
Nat-gas prices continue to be undercut by high inventories caused by weak heating demand during the abnormally mild winter. This past winter's warm temperatures caused nat-gas inventories to rise in Europe and the United States. Gas storage across Europe was 87% full as of August 6, well above the 5-year seasonal average of 73% full for this time of year. U.S. nat-gas inventories as of July 28 were +12.0% above their 5-year seasonal average.
A decrease 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 August 5 fell -0.8% y/y to 95,336 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending August 5 fell -1.6% y/y to 4,061,687 GWh.
The consensus is for Thursday’s weekly EIA nat-gas inventories to climb +24 bcf.
Last Thursday's weekly EIA report of +14 bcf for the week ended July 28 was bullish for nat-gas prices since it was below the estimate of +18 bcf. Also, as of July 28, nat-gas inventories were up +22.1% y/y and +12.0% 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 August 4 was unchanged at 128 rigs, modestly above the 1-1/4 year low of 124 rigs from the week of June 30. Active rigs rose to a 3-3/4 year high of 166 rigs in September 2022. 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.
