June Nymex natural gas (NGM23) on Tuesday closed down -0.104 (-4.49%).
June nat-gas Tuesday fell sharply to a 2-week low on a mild U.S. weather outlook that would curb heating demand for nat-gas. The Commodity Weather Group said above-normal temperatures are expected across the central and southern U.S. states from May 7-11. Also, Tuesday's sell-off in European nat-gas prices to a 1-3/4 year low weighed on U.S. nat-gas prices.
Nat-gas prices have fallen sharply over the past four months and posted a 2-1/2 year nearest-futures low (NGK23) Apr 14 as abnormally mild weather across the northern hemisphere this past winter eroded heating demand for nat-gas. January was the sixth-warmest across the contiguous 48 U.S. states in data from 1895. This winter's warm temperatures have caused rising nat-gas inventories in Europe and the United States. Gas storage across Europe was 60% full as of Apr 30, well above the 5-year seasonal average of 40% full for this time of year. Nat-gas inventories in the U.S. were +22.2% above their 5-year seasonal average as of Apr 21.
Lower-48 state dry gas production on Tuesday was 100 bcf (+3.6% y/y), just below the record high of 101.7 bcf posted on Apr 23, according to BNEF. Lower-48 state gas demand Tuesday was 70.9 bcf/day, up +5.8% y/y, according to BNEF. On Tuesday, LNG net flows to U.S. LNG export terminals were 13.5 bcf, down -0.7% w/w. On Apr 16, LNG net flows to U.S. LNG export terminals rose to a record 14.9 bcf/day as nat-gas exports continue to increase from the Freeport LNG terminal as the terminal was partially reopened after being closed since last June because of an explosion.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended Apr 22 fell -2.3% y/y to 69,355 GWh (gigawatt hours). Although, cumulative U.S. electricity output in the 52-week period ending Apr 22 rose +0.8% y/y to 4,107,335 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories rose +79 bcf, above expectations of +76 bcf and well above the five-year average for this time of year at +43 bcf. Nat-gas inventories as of Apr 21 are +22.2% 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 Apr 28 rose by +2 to 161 rigs, just below the 3-1/4 year high of 166 rigs posted in the week ended Sep 9. 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.
