May Nymex natural gas (NGK23) on Wednesday closed down -0.093 (-4.25%).
May nat-gas prices Wednesday closed sharply lower. Nat-gas prices are being undercut by ample supplies, with U.S. nat-gas inventories being 20% above their 5-year average as of Mar 31. Nat-gas prices are also being undercut by ramped-up U.S. nat-gas production, with Wednesday's lower-48 state U.S. dry gas production up +3.0% yy/ at 99.2 bcf. Nat-gas prices have underlying support from strong demand for U.S. LNG exports.
Nat-gas prices have fallen sharply over the past three months and posted a 2-1/2 year nearest-futures low (NGJ23) last Wednesday as abnormally mild weather across the northern hemisphere erodes 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 56% full as of Apr 9, far above the 5-year seasonal average of 35% full for this time of year.
Lower-48 state dry gas production on Wednesday was 99.2 bcf (+3.0% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF. Lower-48 state gas demand Wednesday was 74.3 bcf/day, up +15.0% y/y, according to BNEF. On Wednesday, LNG net flows to U.S. LNG export terminals rose to a record 14.5 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.
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 Apr 8 rose +0.7% y/y to 71,516 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending Apr 8 rose +1.0% y/y to 4,109,905 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to increase by +28 bcf.
Last Thursday's weekly EIA report was neutral to bearish for nat-gas prices since it showed U.S. nat gas inventories fell -23 bcf, right on expectations. Nat-gas inventories are +19.5% above their 5-year seasonal average.
Baker Hughes reported last Thursday that the number of active U.S. nat-gas drilling rigs in the week ended Apr 7 fell by -2 to 158 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.
