July Nymex natural gas (NGN24) on Wednesday closed up by +0.171 (+6.61%).
July nat-gas prices Wednesday closed sharply higher as US weather forecasts turned warmer, which will boost nat-gas demand from electricity providers to power increased air-conditioning. NatGasWeather said on Wednesday that temperatures are expected to remain above normal in the western US and soar to 100 degrees in the southern US from June 12-19.
Also, an expected below-average build in weekly nat-gas supplies supported prices as the consensus is for Thursday's weekly EIA nat-as inventories to climb by +88 bcf, below the five-year average for this time of year of +103 bcf.
The outlook for warm summer temperatures in the US is a bullish factor for nat-gas prices. The National Weather Service (NWS) said last Tuesday that "the vast majority of the lower 48 US states could see above-average temperatures for the next three months, and for a good portion of states, a hotter-than-normal summer is the most likely scenario."
Lower-48 state dry gas production Wednesday was 98 bcf/day (-3.5% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 68.5 bcf/day (-0.9% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 12.7 bcf/day (-6.1% 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 Wednesday that total US electricity output in the week ended June 1 rose +1.99% y/y to 78,143 GWh (gigawatt hours), and US electricity output in the 52-week period ending June 1 rose +0.67% y/y to 4,113,640 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 24 rose by +84 bcf, above expectations of +78 bcf but below the 5-year average build for this time of year of +104 bcf. As of May 24, nat-gas inventories were up +14.3% y/y and were +26.5% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 70% full as of June 2, above the 5-year seasonal average of 58% 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 May 31 rose by +1 rig to 100, slightly above the 2-1/2 year low of 99 rigs posted in the week ending May 24. Active rigs have fallen since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 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.
