Ample Supplies Pressure Nat-Gas Prices

Rich Asplund Barchart Thu Jun 12, 2:46PM CDT
Triple natural gas flare burning at night by Kirsten Strickland via iStock

July Nymex natural gas (NGN25) on Thursday closed down by -0.015 (-0.43%).

July nat-gas prices on Thursday settled lower on signs of building US nat-gas supplies.  Thursday's weekly EIA nat-gas inventories rose +109 bcf, slightly above expectations of +108 bcf and well above the five-year average for this time of year of +87 bcf.  As of June 6, nat-gas inventories were +5.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  

Prices recovered most of their losses Thursday on forecasts for hotter temperatures to move across the US.  NaGasWeather.com said Thursday that forecasts shifted warmer to hotter for much of the southern two-thirds of the US for June 19-26, potentially boosting nat-gas demand from electricity providers to run air conditioning.  

Lower-48 state dry gas production Thursday was 105.3 bcf/day (+4.3% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 68.9 bcf/day (-2.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 14.5 bcf/day (+7.0% 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 June 7 fell -2.7% y/y to 82,114 GWh (gigawatt hours), although US electricity output in the 52-week period ending June 7 rose +3.0% y/y to 4,246,137 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 6 rose +109 bcf, above expectations of +108 bcf and well above the 5-year average build for this time of year of +87 bcf.  As of June 6, nat-gas inventories were down -9.0% y/y and +5.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  In Europe, gas storage was 52% full as of June 10, versus the 5-year seasonal average of 62% 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 June 6 rose +5 to a 15-month high of 114 rigs, moderately 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.