October Nymex natural gas (NGV23) on Wednesday closed -0.115 (-4.04%).
Nat-gas prices on Wednesday tumbled on the outlook for warmer-than-normal temperatures to curb heating demand for nat-gas. WSI Trader said above-normal temperatures and lack of cool air in the northern states are expected to support much lower than average early-season demand for nat-gas to run heaters in the central and northern parts of the U.S. from Sep 25-29.
Lower-48 state dry gas production Wednesday was 100 bcf/day (+1.6% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 66.3 bcf/day, -3.9% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 12.5 bcf/day or +6.2% w/w.
High inventories caused by carry-over from the mild 2022/23 winter and weak heating demand have undercut nat-gas prices. Gas storage across Europe was 94% full as of September 18, well above the 5-year seasonal average of 85% full for this time of year. U.S. nat-gas inventories as of September 8 were +6.8% above their 5-year seasonal average.
Nat-gas prices have support from labor disruptions in Australia. LNG workers at key Chevron sites in Australia recently began partial strikes after talks with management failed to reach an agreement. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if Australian strikes reduce Australian LNG production. Australia is the world's third-largest liquified natural gas (LNG) exporter, accounting for about 10% of global supplies last year.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended September 16 rose +2.3% y/y to 80,267 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending September 16 fell -0.9% y/y to 4,083,880 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to climb by +65 bcf.
Last Thursday's weekly EIA report of +57 bcf for the week ended September 8 was bearish for nat-gas prices since it was above expectations of +50 bcf, although below the 5-year average for this time of year at +76 bcf. As of September 8, nat-gas inventories were up +15.7% y/y and were +6.8% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended September 15 rose by +8 to 121 rigs, rebounding from the prior week's 19-month low of 113 rigs. Active rigs rose to a 4-year high of 166 rigs in September 2022. Active rigs have roughly 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.
