Aug Nymex natural gas (NGQ23) on Thursday closed -0.160 (-6.00%).
Nat-gas prices Thursday sold off sharply to a 5-week low on a larger-than-expected build in weekly EIA inventories and forecasts for cooler U.S. temperatures next week, which will curb nat-gas demand from electricity providers to power air conditioning. The EIA reported Thursday that nat-gas inventories rose +16 bcf last week, above expectations of +14 bcf. Also, forecaster Atmospheric G2 said below-normal temperatures are expected for the northeastern U.S. and California to the Northern High Plains from Aug 1-5.
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 84% full as of July 23, well above the 5-year seasonal average of 69% full for this time of year. U.S. nat-gas inventories as of July 21 were +13.1% above their 5-year seasonal average.
Lower-48 state dry gas production on Thursday was 100.9 bcf/day (+2.9% y/y), according to BNEF. Lower-48 state gas demand Thursday was 76.4 bcf/day, +4.2% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Thursday were 12.1 bcf/day or -4.0% w/w.
A decline 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 July 22 fell -4.0% y/y to 95,454 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending July 22 fell -1.5% y/y to 4,058,716 GWh.
Thursday's weekly EIA report of +16 bcf for the week ended July 21 was bearish for nat-gas prices since it was below the estimate of +14 bcf. Also, as of July 21, nat-gas inventories were up +23.6% y/y and +13.1% 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 July 21 fell by two rigs to 131 rigs, moderately 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.
