May Nymex natural gas (NGK23) on Tuesday closed up +0.009 (+0.43%).
May nat-gas Tuesday recovered from early losses and posted modest gains as a decline in the dollar index (DXY00) to a 2-month low sparked short covering in nat-gas futures. Nat-gas prices Tuesday initially moved lower on negative carryover from Monday when the National Oceanic and Atmospheric Administration (NOAA) forecasted above-normal temperatures for most of the central and eastern U.S. from April 10-16. The above-normal temperatures will curb heating demand for nat-gas and are bearish for prices.
Lower-48 state dry gas production on Tuesday was 97.8 bcf (+2.2% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF. Lower-48 state gas demand Tuesday was 72.1 bcf/day, down -1.1% y/y, according to BNEF. On Tuesday, LNG net gas flows to U.S. LNG export terminals was 14.1 bcf, up +1.6% w/w. Last Wednesday, LNG net flows to U.S. LNG export terminals rose to a record 14.2 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.
Nat-gas prices have fallen sharply over the past three months and posted a 2-1/2 year nearest-futures low (NGJ23) last Wednesday as normally mild weather across the northern hemisphere erodes 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 U.S. Gas storage across Europe was 56% full as of Apr 2, far above the 5-year seasonal average of 35% full for this time of year. Also, U.S. nat-gas inventories were +22.7% above their 5-year average as of Mar 17.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended Mar 25 rose +5.9% y/y to 74,307 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending Mar 25 rose +1.2% y/y to 4,110,090 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since it showed U.S. nat gas inventories fell -47 bcf, less than expectations of -54 bcf. Nat-gas inventories are +21.0% 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 Mar 31 fell by -2 to 160 rigs, just 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).
