Nat-Gas Prices Turn Higher on Warmer US Weather Forecasts
June Nymex natural gas (NGM25) on Friday closed up by +0.081 (+2.49%).
June nat-gas prices on Friday recovered from an early slide and settled higher. Short-covering emerged in nat-gas futures Friday after weather forecasts turned warmer for most of the US, which could boost nat-gas demand from electricity providers to power increased air conditioning usage. NOAA forecasts on Friday shifted warmer for most of the US from May 28 to June 1.
Nat-gas prices Friday initially moved lower on negative carryover from Thursday when the EIA reported a larger-than-expected build of weekly inventories. Weekly EIA mat-gas inventories rose by +120 bcf for the week ended May 16, well above the five-year average for this time of year of +87 bcf.
Lower-48 state dry gas production Friday was 107.0 bcf/day (+4.7% y/y), according to BNEF. Lower-48 state gas demand Friday was 70.5 bcf/day (+2.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 14.3 bcf/day (+0.2% 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 (lower-48) electricity output in the week ended May 17 rose +2.5% y/y to 75,855 GWh (gigawatt hours), and US electricity output in the 52-week period ending May 17 rose +3.67% y/y to 4,253,433 GWh.
Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 16 rose +120 bcf, slightly above expectations of +119 bcf and well above the 5-year average build for this time of year of +87 bcf. As of May 16, nat-gas inventories were down -12.7% y/y and +3.9% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 45% full as of May 20, versus the 5-year seasonal average of 56% full for this time of year.
Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending May 23 fell -2 to 98 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.