October Nymex natural gas (NGV23) on Friday closed -0.003 (-0.11%).
Nat-gas prices Friday gave up an early advance and closed slightly lower after updated weather forecasts called for seasonal temperatures to return to the central and eastern U.S. by the end of next week. Nat gas prices Friday initially moved higher on forecasts for excessive heat for the central and eastern U.S., which would reduce nat-gas demand from electricity providers to power air conditioning. Forecaster Maxar Technologies said well above-normal temperatures are seen in the central and eastern U.S. from Sep 4-8.
Lower-48 state dry gas production on Friday was 99.5 bcf/day (+0.9% y/y), according to BNEF. Lower-48 state gas demand Friday was 68.7 bcf/day, -5.4% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 12.7 bcf/day or +3.3% w/w.
On August 9, nat-gas prices soared to a 6-month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Australia's LNG workers said a strike could occur as soon as September 2 if no deal is reached. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if workers strike. Australia is the world's third-largest liquified natural gas (LNG) exporter, accounting for 10% of global supplies.
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 93% full as of August 27, well above the 5-year seasonal average of 80% full for this time of year. U.S. nat-gas inventories as of August 25 were +8.7% above their 5-year seasonal average.
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 August 26 rose +9.4% y/y to 95,735 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending August 26 fell -1.0% y/y to 4,076,287 GWh.
Thursday's weekly EIA report of +32 bcf for the week ended August 25 was bearish for nat-gas prices since it was above expectations of +26 bcf. As of August 25, nat-gas inventories were up +18.0% y/y and +8.7% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended September 1 fell by -1 to a 19-month low of 114 rigs. Active rigs rose to a 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).
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