Warm US Spring Temps Weigh on Nat-Gas Prices
May Nymex natural gas (NGK25) on Thursday closed down by -0.002 (-0.06%).
May nat-gas prices on Thursday fell to a 2-1/2 month low and settled slightly lower. On Thursday, nat-gas prices were under pressure on forecasts for warm spring US temperatures that will curb heating demand and allow nat-gas inventories to rebuild. Forecaster Atmospheric G2 said Thursday that forecasts shifted warmer for the eastern two-thirds of the US for April 22-26. However, short covering emerged in nat-gas futures Thursday, and prices recovered almost all of their losses after weekly EIA nat-gas inventories rose +16 bcf, below expectations of+24 bcf.
Last month, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season. BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.
Lower-48 state dry gas production Thursday was 105.6 bcf/day (+5.4 y/y), according to BNEF. Lower-48 state gas demand Thursday was 70.1 bcf/day (+2.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 15.5 bcf/day (-4.8% 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 April 12 rose +6.4% y/y to 73,420 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 12 rose +3.7% y/y to 4,247,718 GWh.
In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.
Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended April 11 rose +16 bcf, below expectations of +24 bcf and below the 5-year average draw for this time of year of +50 bcf. As of April 11, nat-gas inventories were down -20.9% y/y and -3.9% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 36% full as of April 15, versus the 5-year seasonal average of 47% full for this time of year.
Baker Hughes reported Thursday that the number of active US nat-gas drilling rigs in the week ending April 18 rose +1 to 98 rigs, modestly above the 3-1/2 year low of 94 rigs posted on September 6, 2024. Active rigs have fallen since posting a 5-1/4 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.