June Nymex natural gas (NGM24) on Wednesday closed down by -0.059 (-2.96%).
June nat-gas prices closed moderately lower on Wednesday for a second session. Ample US supplies and mild spring temperatures are undercutting nat-gas prices. As of April 19, nat-gas inventories were +37.0% above their 5-year seasonal average. NatGasWeather said Tuesday that "surpluses are still expected to remain hefty and over +600 bcf into late May, which will keep the background state bearish." On Wednesday, NatGasWeather said forecasts show above-normal temperatures for most of the US for May 8-15.
May nat gas prices last Friday tumbled to a 3-3/4 year nearest-futures low (NGK24) due to ample US nat-gas supplies and mild spring temperatures. Nat-gas prices have collapsed this year after an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average.
Nat-gas prices are also 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 May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.
Lower-48 state dry gas production Wednesday was 97.6 bcf/day (-4.0% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 66.7 bcf/day (-5.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 11.9 bcf/day (-1.1% w/w), according to BNEF.
An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total US electricity output in the week ended April 27 rose +1.81% y/y to 69,594 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending April 27 fell -0.2% y/y to 4,097,611 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb by +58 bcf, below the 5-year average for this time of year of +72 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended April 19 rose by +92 bcf, more than expectations of +86 bcf and above the 5-year average build for this time of year of +86 bcf. As of April 19, nat-gas inventories were up +20.7% y/y and were +37.0% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 62% full as of April 29, above the 5-year seasonal average of 47% 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 April 26 fell by -1 rig to a 2-1/4 year low of 105 rigs. 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.
