Aug Nymex natural gas (NGQ23) on Tuesday closed +0.045 (+1.68%).
Nat-gas prices on Tuesday settled moderately higher as near-record high temperatures this week in the central and southwestern U.S will boost nat-gas demand from electricity providers to increase air-conditioning usage. Nat-gas prices Tuesday also had carryover support from a rally in European gas prices to a 2-week high. Gains in nat-gas were contained after forecaster Atmospheric G2 said cooler temperatures are expected for the central and eastern U.S from July 30-Aug 3.
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 14 were +13.8% above their 5-year seasonal average.
Lower-48 state dry gas production on Tuesday was 98.9 bcf/day (+0.9% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 76.9 bcf/day, +1.8% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Tuesday were 12.5 bcf/day or +1.8% w/w.
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 15 rose +2.2% y/y to 94,718 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending July 15 fell -1.1% y/y to 4,062,708 GWh.
Last Thursday's weekly EIA report of +41 bcf for the week ended July 14 was bullish for nat-gas prices since it was below the estimate of +45 bcf. However, as of July 14, nat-gas inventories were up +23.7% y/y and +13.8% 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.
