September Nymex natural gas (NGU23) on Friday closed +0.007 (+0.25%).
Nat-gas prices Friday recovered from early losses and closed slightly higher. Short-covering emerged in nat-gas futures Friday afternoon after the weekly report from Baker Hughes showed active U.S. nat gas rigs fell to a 1-1/2 year low. Nat-gas also garnered support from the latest weather forecasts that call for above-average temperatures to return to the West, South, and Eastern U.S. from August 17-24, with excessive heat persisting in the Southwest. The hotter temperatures will boost nat-gas demand from electricity providers to power air conditioning.
On Wednesday, nat-gas prices soared to a 5-1/2 month high after European nat-gas price surged more than +28% to a 1-3/4 month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. 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.
Lower-48 state dry gas production on Friday was 101.0 bcf/day (+4.3% y/y), according to BNEF. Lower-48 state gas demand Friday was 75.2 bcf/day, +1.1% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 12.5 bcf/day or +5.0% w/w.
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 87% full as of August 6, well above the 5-year seasonal average of 73% full for this time of year. U.S. nat-gas inventories as of August 4 were +11.2% above their 5-year seasonal average.
A decrease in U.S. electricity output is bearish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended August 5 fell -0.8% y/y to 95,336 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending August 5 fell -1.6% y/y to 4,061,687 GWh.
Thursday's weekly EIA report of +29 bcf for the week ended August 4 was bearish for nat-gas prices since it was above the estimate of +24 bcf. Also, as of August 4, nat-gas inventories were up +21.2% y/y and +11.2% 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 August 11 fell by -5 to a 1-1/2 year low of 123 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).
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.
