June Nymex natural gas (NGM24) on Tuesday closed up +0.070 (+2.78%).
June nat-gas prices Tuesday recovered from a 1-week low and closed moderately higher. Short covering in nat-gas futures emerged to push prices higher on forecasts for hot weather to expand across most of the US, boosting nat-gas demand from electricity providers to power air-conditioning. The Commodity Weather Group said Tuesday that forecasts of warmer weather expanded across much of the country, particularly to the East Coast and across much of the central part of the US from June 2-8.
In addition, the National Weather Service said Tuesday that "the vast majority of the lower 48 US states could see above-average temperatures for the next three months, and for a good portion of states, a hotter-than-normal summer is the most likely scenario."
Nat-gas prices have rebounded higher to a 4-1/2 month high last Thursday from the 3-3/4 year nearest-futures low (NGK24) posted on April 26. Nat-gas prices collapsed over the winter and early spring after unusually mild winter temperatures curbed heating demand for nat-gas and pushed inventories well above average.
Nat-gas prices were 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 late 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 Tuesday was 100.1 bcf/day (-1.1% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 65.1 bcf/day (+12.4% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.4 bcf/day (+4.2% 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 last Wednesday that total US electricity output in the week ended May 18 fell -0.02% y/y to 74,022 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending May 18 rose +0.23% y/y to 4,102,933 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended May 17 rose by +78 bcf, below expectations of +85 bcf and below the 5-year average build for this time of year of +92 bcf. As of May 17, nat-gas inventories were up +16.1% y/y and were +28.8% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 69% full as of May 26, above the 5-year seasonal average of 56% 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 24 fell by -4 rigs to a 2-1/2 year low of 99 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).
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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.