September Nymex natural gas (NGU23) on Wednesday closed -0.083 (-3.24%).
Nat-gas prices Wednesday extended Tuesday's losses to a 6-week low and settled moderately lower. Gas prices are under pressure on the outlook for cooler weather in the Midwest and East Coast, which would reduce nat-gas demand from electricity providers to power air conditioning. Forecaster Maxar Technologies said cooler temperatures are expected to move into the Midwest and East Coast between August 7-11.
Lower-48 state dry gas production on Wednesday was 100.7 bcf/day (+2.7% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 74.5 bcf/day, +0.8% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 12.6 bcf/day or +2.9% 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 21 were +13.1% 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 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.
The consensus is that Thursday's weekly EIA nat-gas inventories will climb by +18 bcf.
Last Thursday's weekly EIA report of +16 bcf for the week ended July 21 was bearish for nat-gas prices since it was above 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 28 fell by three rigs to 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.
