May Nymex natural gas (NGK24) on Wednesday closed down by -0.159 (-8.77%).
May nat gas prices Wednesday fell to a 1-week low and closed sharply lower on forecasts for mild US weather and abundant nat-gas supplies. The Commodity Weather Group Wednesday said temperatures for the Midwest are expected to turn mild from April 29 to May 3, which will curb nat-gas demand for heating and cooling. Also, Thursday's weekly EIA nat-gas inventories are expected to climb +86 bcf, well above the +59 bcf average for this time of year, adding to already elevated US inventories.
Nat-gas prices collapsed earlier this year, with nearest-futures (NGJ24) posting a 3-3/4 year low on March 26 after an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average. As of April 12, US nat-gas inventories were +36.4% above their 5-year seasonal average, signaling abundant nat-gas supplies.
Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas. The unit recently reopened on a partial basis. However, Freeport said that once the production unit is fully reopened, the other two units will be taken down for maintenance, and all three units will not return online until May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.
Lower-48 state dry gas production Wednesday was 96.7 bcf/day (-3.5% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 68.5 bcf/day (-7.0% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 12.4 bcf/day (+23.2% 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 April 20 rose +2.48% y/y to 71,072 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending April 20 fell -0.27% y/y to 4,096,373 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended April 12 rose by +50 bcf, a smaller build than expectations of +53 bcf and below the 5-year average build for this time of year of +61 bcf. As of April 12, nat-gas inventories were up +20.9% y/y and were +36.4% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 62% full as of April 22, above the 5-year seasonal average of 45% 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 April 19 fell by -3 rigs to a 2-1/4 year low of 106 rigs. Active rigs have fallen since climbing to a 4-1/2 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.
