October Nymex natural gas (NGV23) on Wednesday closed -0.072 (-2.79%).
Nat-gas prices on Wednesday extended Tuesday's sharp decline to a 2-week low. Nat-gas prices were undercut by forecasts for cooler-than-normal U.S. temperatures that would reduce nat-gas demand from electricity providers to run air conditioning. The Commodity Weather Group said normal to below-normal temperatures are seen in the eastern two-thirds of the U.S. from September 11-20.
Lower-48 state dry gas production Wednesday was 100.4 bcf/day (+0.9% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 75.0 bcf/day, +3.9% y/y, according to BNEF. LNG net flows to U.S. LNG export terminals Wednesday were 12.6 bcf/day or -2.1% w/w.
On August 9, nat-gas prices soared to a 6-month high when LNG workers in Australia voted to strike, which could tighten global nat-gas supplies. Australia's LNG workers threaten two weeks of 24-hour rolling outages at two major export plants beginning September 14 if no deal is reached. Inspired Plc predicts Asian LNG buyers "would likely bid up LNG imports" to replace Australian volumes if workers strike. Australia is the world's third-largest liquified natural gas (LNG) exporter, accounting for 10% of global supplies.
Nat-gas prices continue to be undercut by high inventories caused by weak heating demand during the abnormally mild winter. This past winter's warm temperatures caused nat-gas inventories to rise in Europe and the United States. Gas storage across Europe was 93% full as of September 3, well above the 5-year seasonal average of 82 full for this time of year. U.S. nat-gas inventories as of August 25 were +8.7% above their 5-year seasonal average.
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 August 26 rose +9.4% y/y to 95,735 GWh (gigawatt hours). However, cumulative U.S. electricity output in the 52-week period ending August 26 fell -1.0% y/y to 4,076,287 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will climb +41 bcf.
Last Thursday's weekly EIA report of +32 bcf for the week ended August 25 was bearish for nat-gas prices since it was above expectations of +26 bcf. As of August 25, nat-gas inventories were up +18.0% y/y and were +8.7% above their 5-year seasonal average, signaling ample nat-gas supplies.
Baker Hughes reported last Friday the number of active U.S. nat-gas drilling rigs in the week ended September 1 fell by -1 to a 19-month low of 114 rigs. Active rigs rose to a 4-year high of 166 rigs in September 2022. Active rigs have more than 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.
