Aug Nymex natural gas (NGQ23) on Wednesday closed -0.099 (-3.63%).
Nat-gas prices Wednesday retreated after updated weather forecasts called for cooler late-July temperatures in much of the central and eastern U.S., which would curb nat-gas demand from electricity providers to power air conditioning. Forecaster Maxar Technologies said near-normal temperatures are expected in the eastern half of the U.S. from July 22-26, shifting cooler from the previous forecast.
Lower-48 state dry gas production on Wednesday was 98.2 bcf/day (+2.2% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 74.0 bcf/day, -1.2% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 11.6 bcf/day or -11.9% w/w.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended July 8 fell -1.7% y/y to 90,167 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending July 8 fell -1.1% y/y to 4,060,674 GWh.
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 80% full as of July 9, well above the 5-year seasonal average of 65% full for this time of year. U.S. nat-gas inventories as of June 30 were +14.6% above their 5-year seasonal average.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb +50 bcf.
Last Friday's weekly EIA report of +72 bcf for the week ended June 30 was bearish for nat-gas prices since it was above the market estimate of +65 bcf and the 5-year average increase for the week of +64 bcf. Nat-gas inventories as of June 30 were up +24.5% y/y and +14.6% 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 7 rose by 11 rigs to 135 rigs, rebounding from the prior week's 1-1/4 year low of 124 rigs. 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.
