September Nymex natural gas (NGU23) on Wednesday closed -0.067 (-2.52%).
On Wednesday, Nat-gas prices extended Tuesday's losses to a 1-1/2 week low and closed moderately lower. Forecasts for cooler U.S. temperatures that will reduce nat-gas demand from electricity providers to power air conditioning are weighing on nat-gas prices. NatGasWeather.com said cooler temperatures are expected to move into much of the Midwest and Northeast next week, although hot temperatures will remain in the Pacific Northwest.
Lower-48 state dry gas production on Wednesday was 100.5 bcf/day (+4.2% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 75.3 bcf/day, +6.5% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 12.6 bcf/day or +1.2% w/w.
Last Wednesday, nat-gas prices soared to a 5-3/4 month high after European nat-gas price surged more than +28% to a 2-month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if workers strike. Australia is the world's third-largest liquified natural gas (LNG) exporter.
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 89% full as of August 13, well above the 5-year seasonal average of 75% full for this time of year. U.S. nat-gas inventories as of August 4 were +11.2% 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 August 12 rose +1.0% y/y to 92,749 GWh (gigawatt hours). Although, cumulative U.S. electricity output in the 52-week period ending August 12 fell -1.6% y/y to 4,062,574 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will climb +35 bcf.
Last Thursday's weekly EIA report of +29 bcf for the week ended August 4 was bearish for nat-gas prices since it was above the estimate of +24 bcf. Also, as of August 4, nat-gas inventories were up +21.2% y/y and +11.2% 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 August 11 fell by -5 to a 1-1/2 year low of 123 rigs. Active rigs rose to a 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.
