July Nymex natural gas (NGN23) on Friday rallied sharply to a new 1-month high and closed the day up +0.121 (+4.64%).
Hot weather continues to be the main bullish factor for nat-gas prices, with the scorching weather in Texas expected to last into next week. Utilities in Texas are straining to produce enough electricity to run air conditioning. However, the Commodity Weather Group is looking for cooler temperatures in the Midwest and East. Nat-gas prices on Friday shook off Thursday's bearish EIA report and the +0.5% rally in the dollar index.
Lower-48 state dry gas production on Friday was 99.7 bcf (+3.0 y/y), moderately below the record high of 101.7 bcf posted on Apr 23, according to BNEF. Lower-48 state gas demand Friday was 66.4 bcf/day, -5.0% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 10.7 bcf. 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 June 14 that total U.S. electricity output in the week ended June 10 fell -7.1% y/y to 76,117 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending June 10 fell -0.3% y/y to 4,080,360 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 74% full as of June 18, well above the 5-year seasonal average of 58% full for this time of year.
Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat-gas inventories rose +95 bcf, above the 5-year average for the week of +86 bcf. Nat-gas inventories as of June 16 were +15.3% above their 5-year seasonal average.
Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended June 23 was unchanged at a 15-month low of 130 rigs, well below the 3-3/4 year high of 166 rigs posted in the week ended Sep 9, 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.
