May Nymex natural gas (NGK24) on Monday closed down by -0.079 (-4.46%).
May nat gas prices Monday tumbled to a 3-week nearest-futures low and closed sharply lower. Forecasts for above-average US spring temperatures that will reduce heating demand for nat-gas are weighing on prices. On Monday, the Commodity Weather Group said forecasts are trending warmer across much of the southern and eastern US for April 20-24.
Nat-gas prices have collapsed this year, with nearest-futures (NGJ24) posting a 3-3/4 year low last on March 26 as an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average. As of April 5, US nat-gas inventories were +38.4% 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 Monday was 98.1 bcf/day (-1.5% y/y), according to BNEF. Lower-48 state gas demand Monday was 66.5 bcf/day (+11.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Monday were 11.0 bcf/day (-14.3% 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 last Wednesday that total US electricity output in the week ended April 6 rose +0.08% y/y to 71,574 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending April 6 fell -0.38% y/y to 4,094,243 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended April 5 rose by +24 bcf, a larger build than expectations of +15 bcf and right on the 5-year average build for this time of year. As of April 5, nat-gas inventories were up +23.1% y/y and were +38.4% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 61% full as of April 8, above the 5-year seasonal average of 43% 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 12 fell by -1 rig to a 2-1/4 year low of 109 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.
