June Nymex natural gas (NGM23) on Monday closed down -0.185 (-7.16%).
Jun nat-gas prices Monday fell sharply amid ample U.S. supplies and a cooler U.S. weather forecast that will reduce the demand from electricity providers to power air conditioning. Nat-gas inventories in the U.S. were +17.8% above their 5-year seasonal average as of May 12. The Commodity Weather Group said normal to below-normal temperatures are seen across the southern and eastern U.S. through May 31. A drop in European nat-gas prices Monday to a 23-month low also weighed on U.S. nat-gas prices.
Reduced Canadian gas output is bullish for prices as wildfires in Alberta have halted nat-gas production in western Canada for several Canadian nat-gas producers. The total number of wildfires in Alberta stood at 86 Sunday, with 26 still considered out of control.
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 64% full as of May 16, well above the 5-year seasonal average of 46% full for this time of year. Nat-gas inventories in the U.S. were +17.8% above their 5-year seasonal average as of May 12.
Lower-48 state dry gas production on Monday was 101 bcf (+3.5% y/y), just below the record high of 101.7 bcf posted on Apr 23, according to BNEF. Lower-48 state gas demand Monday was 62.6 bcf/day, down -2.1% y/y, according to BNEF. On Monday, LNG net flows to U.S. LNG export terminals were 13.1 bcf, down -0.1% 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 last Wednesday that total U.S. electricity output in the week ended May 13 fell -4.6% y/y to 73,314 GWh (gigawatt hours). Although, cumulative U.S. electricity output in the 52-week period ending May 13 rose +0.4% y/y to 4,099,352 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since it showed U.S. nat gas inventories rose +99 bcf, below expectations of +108 bcf but above the five-year average for this time of year of +91 bcf. Nat-gas inventories as of May 12 are +17.8% 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 19 was unchanged at a 13-month low of 141 rigs, moderately 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.
