June Nymex natural gas (NGM24) on Monday closed up +0.129 (+5.73%).
June nat-gas prices on Monday rallied to a new 3-1/2 month nearest-futures high and settled sharply higher. Prices rallied on the outlook for warm US temperatures that will boost nat-gas demand from electricity providers to power air-conditioning. The Commodity Weather Group said Monday that the eastern two-thirds of the US shifted warmer for May 18-22, with most temperatures well above average.
Nat-gas prices have rebounded higher from the 3-3/4 year nearest-futures low (NGK24) posted on April 26. Nat-gas prices collapsed over the winter after unusually mild winter temperatures curbed heating demand for nat-gas and pushed inventories well above average.
Lower-48 state dry gas production Monday was 100.2 bcf/day (-0.7% y/y), according to BNEF. Lower-48 state gas demand Monday was 64.7 bcf/day (+5.9% y/y), according to BNEF. LNG net flows to US LNG export terminals Monday were 13.2 bcf/day (+6.1% w/w), according to BNEF.
Nat-gas prices were under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas. The unit recently reopened on a partial basis. However, Freeport said that once the production unit is fully reopened, the other two units will be taken down for maintenance, and all three units will not return online until late May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.
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 May 4 rose +5.47% y/y to 73,515 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending May 4 fell -0.04% y/y to 4,101,422 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended May 3 rose by +79 bcf, below expectations of +86 bcf and below the 5-year average build for this time of year of +81 bcf. As of May 3, nat-gas inventories were up +19.7% y/y and were +33.3% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 64% full as of May 6, above the 5-year seasonal average of 49% 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 10 rose by +1 rig to 103 rigs, slightly above the 2-1/2 year low of 102 rigs posted in the week ended May 3. 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.
