August Nymex natural gas (NGQ24) on Tuesday closed down -0.064 (-2.84%), giving back part of Monday's rally of +5.78%.
Aug nat-gas prices on Tuesday ran into some long liquidation pressure after Monday's rally. However, nat-gas prices have continued support from hot US weather forecasts, which would boost nat-gas demand from electricity providers to run air conditioning. NatGasWeather sees warm to hot weather for most of the US during July 30 to Aug 6.
Nat-gas prices have been undercut by the glut of US nat-gas supplies, with nat-gas inventories +16.9% above their 5-year seasonal average as of July 12. Also, an outage at the Freeport liquified natural gas terminal has reduced US gas exports and boosted already bloated inventories. The Freeport LNG terminal slowly began to restart after Hurricane Beryl damaged part of the plant. The Freeport LNG plant is one of the largest in the US and can liquefy as much as 2% of US daily gas production.
Lower-48 state dry gas production Tuesday was 102.4 bcf/day (+1.1% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 77.5 bcf/day (+4.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 12.5 bcf/day (+16.7% 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 July 17 that total US electricity output in the week ended July 13 rose +2.5% y/y to 97,089 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 13 rose +2.13% y/y to 4,149,112 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended July 12 rose by +10 bcf, below expectations of +27 bcf and below the 5-year average build for this time of year of +49 bcf. However, as of July 12, nat-gas inventories were up +8.0% y/y and were +16.9% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 80% full as of July 8, above the 5-year seasonal average of 70% 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 July 19 rose +3 rigs to 103 rigs, modestly above the 2-3/4 year low of 97 rigs from June 28. Active rigs have fallen back since posting a 4-3/4 year high of 166 rigs in Sep 2022, up 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.
