July Nymex natural gas (NGN24) on Wednesday closed down by -0.084 (-2.68%).
July nat-gas prices Wednesday retreated on the outlook for ample US nat-gas supplies to continue despite hot weather. As of May 31, US nat-gas inventories were up +13.5% y/y and were +25.1% above their 5-year seasonal average. The consensus is for Thursday's weekly EIA nat-gas inventories to climb by +76 bcf, which will help keep inventories elevated.
Nat-gas prices Tuesday rallied to a 4-3/4 month nearest-futures high on the outlook for hotter-than-normal US temperatures that will boost nat-gas demand from electricity providers for air-conditioning. NatGasWeather said Tuesday that well above normal temperatures are expected to move into the lower 48 US states from June 18-25.
The outlook for hot summer temperatures in the US is a bullish factor for nat-gas prices. Last Tuesday, the National Weather Service (NWS) said 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 98.5 bcf/day (-3.4% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 67.9 bcf/day (-0.1% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 13.2 bcf/day (+0.1% 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 8 rose +10.89% y/y to 84,405 GWh (gigawatt hours), and US electricity output in the 52-week period ending June 8 rose +1.02% y/y to 4,121,928 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 31 rose by +98 bcf, above expectations of +88 bcf but below the 5-year average build for this time of year of +103 bcf. As of May 31, nat-gas inventories were up +13.5% y/y and were +25.1% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 72% full as of June 10, above the 5-year seasonal average of 61% 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 June 7 fell by -2 rigs to a 2-3/4 year low of 98 rigs. Active rigs have fallen since climbing to a 4-3/4 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.
