September Nymex natural gas (NGU23) on Monday closed +0.148 (+5.74%).
Nat-gas prices Monday rallied sharply to a 1-1/2 week high on the outlook for excessive heat to return to the East Coast, which will boost nat-gas demand from electricity providers to power air conditioning. Forecaster Maxar Technologies said the latest forecasts show heat building in the West and Southwest, with above-normal temperatures spreading to the East Coast from August 12-16.
Lower-48 state dry gas production on Monday was 101.6 bcf/day (+3.4% y/y), according to BNEF. Lower-48 state gas demand Monday was 77.0 bcf/day, +5.4% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Monday were 12.7 bcf/day or +0.3% 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 64% full as of July 30, well above the 5-year seasonal average of 71% full for this time of year. U.S. nat-gas inventories as of July 28 were +12.0% above their 5-year seasonal average.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended July 29 rose +4.0% y/y to 97,452 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending July 29 fell -1.4% y/y to 4,062,444 GWh.
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 Aug 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.
