Nat-Gas Prices Slump as Warm US Temps Expected to Boost Inventories
June Nymex natural gas (NGM25) on Wednesday closed down by -0.155 (-4.25%).
June nat-gas prices on Wednesday tumbled to a 1-week low and settled sharply lower. Forecasts for mild US spring temperatures that will reduce demand for air-conditioning are weighing on nat-gas prices. Forecaster Vaisala said Wednesday that weather forecasts shifted cooler for May 19-23 in the US East and Midwest.
Also weighing on nat-gas prices are the expectations that above-normal spring temperatures will boost US nat-gas inventories. The consensus is that Thursday's weekly EIA nat-gas inventories will climb by +111 bcf for the week ended May 9, above the five-year average for the week of +83 bcf.
Lower-48 state dry gas production Wednesday was 104.5 bcf/day (+3.9% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 65.1 bcf/day (-4.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 14.3 bcf/day (+4.1% w/w), according to BNEF.
A decline in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total US (lower-48) electricity output in the week ended May 10 fell -2.8% y/y to 72,735 GWh (gigawatt hours), although US electricity output in the 52-week period ending May 10 rose +3.6% y/y to 4,251,600 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 2 rose +104 bcf, above expectations of +101 bcf and well above the 5-year average build for this time of year of +79 bcf. As of May 2, nat-gas inventories were down -16.5% y/y and +1.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 43% full as of May 11, versus the 5-year seasonal average of 53% 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 May 9 was unchanged at 101 rigs, modestly above the 4-year low of 94 rigs posted on September 6, 2024. Active rigs have fallen since posting a 5-1/2 year high of 166 rigs in Sep 2022, up 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.