Aug Nymex natural gas (NGQ23) on Tuesday closed +0.062 (+2.32%).
Nat-gas prices Tuesday moved higher for a second day on the outlook for excessive heat gripping the U.S. Southwest to expand, boosting nat-gas demand from electricity providers to power air conditioning. The U.S. Weather Prediction Center said record-high temperatures are expected across California, Nevada, and Arizona this weekend, and towards the east, excessive heat will push into Texas and along the Gulf Coast.
Lower-48 state dry gas production on Tuesday was 99.3 bcf/day (+2.1% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 73.7 bcf/day, +0.4% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Tuesday were 12.1 bcf/day or -9.4% w/w.
A decline in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported last Thursday that total U.S. electricity output in the week ended July 1 fell -0.4% y/y to 89,839 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending July 1 fell -1.0 y/y to 4,062,263 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.
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.
