June Nymex natural gas (NGM23) on Wednesday closed down -0.076 (-3.35%).
Jun nat-gas prices retreated Wednesday as firefighters made progress in battling wildfires in Alberta, Canada. Also, forecasts for rain to move into western Canada should help firefighters contain the fires that are still burning. Tradition Energy said that less than 1 billion cubic feet (bcf) of Canadian gas production was still halted because of the fires. About 2.5 bcf/day of nat-gas production, about 15% of Canada's production, had been shut down by the fires. In addition, a slide in European nat-gas prices Wednesday to a 1-3/4 year low undercut U.S. nat-gas prices.
Nat-gas prices fell sharply starting in December 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 62% full as of May 8, well above the 5-year seasonal average of 43% full for this time of year. Nat-gas inventories in the U.S. were +19.8% above their 5-year seasonal average as of Apr 28.
Lower-48 state dry gas production on Wednesday was 99.3 bcf (+2.8% y/y), just below the record high of 101.7 bcf posted on Apr 23, according to BNEF. Lower-48 state gas demand Wednesday was 64.0 bcf/day, up +1.4% y/y, according to BNEF. On Wednesday, LNG net flows to U.S. LNG export terminals were 12.4 bcf, down -6.4% 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 Wednesday that total U.S. electricity output in the week ended May 6 fell -3.9% y/y to 69,704 GWh (gigawatt hours). Although, cumulative U.S. electricity output in the 52-week period ending May 6 rose +0.7% y/y to 4,102,911 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb +77 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories rose +54 bcf, above expectations of +52 bcf but well below the five-year average for this time of year of +78 bcf. Nat-gas inventories as of Apr 28 are +19.8% 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 May 5 fell by -4 to 157 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.
