Natural Gas Prices Flat Amid Mixed Demand and Forecast Changes
On Tuesday, June Nymex natural gas (NGM25) closed at +0.001, representing a slight increase of +0.03%.
Price Fluctuations and Temperature Outlook
Natural gas prices showed little movement on Tuesday. The market experienced some downward pressure due to a Monday forecast indicating near-normal U.S. temperatures might reduce electricity demand for air conditioning. According to forecaster Atmospheric G2, warm temperatures initially expected for the western and north-central U.S. from May 17-21 have now shifted to cooler projections. This adjustment implies that anticipated air-conditioning demand could decrease.
Despite the previous day’s downturn, natural gas prices recovered on Tuesday. This was primarily driven by short covering as forecasts for temperatures in the Southeast and Texas indicated values above normal for May 18-22, which could bolster air-conditioning demand.
Production and Demand Metrics
On the production side, Lower-48 state dry gas production on Tuesday was reported at 104.6 billion cubic feet per day (bcf/day), marking a 3.3% year-over-year increase, as per BNEF. In comparison, gas demand in these states was 65.0 bcf/day, reflecting a decrease of 1.4% year-over-year. Notably, liquefied natural gas (LNG) net flows to U.S. export terminals rose to 14.4 bcf/day, which is a significant 17.6% increase week-over-week.
Electricity Output and Its Impact on Demand
Increased electricity output in the U.S. is positively impacting natural gas demand from utility providers. The Edison Electric Institute indicated that total electricity output for the week ending May 3 increased by 1.2% year-over-year to 74,373 gigawatt hours (GWh). For the 52-week period ending May 3, this output rose by 3.7% year-over-year, totaling 4,253,707 GWh.
Inventory Levels and Market Reactions
Last Thursday’s weekly EIA report introduced bearish sentiment in the market, as natural gas inventories for the week ending May 2 rose by 104 bcf, surpassing expectations of a 101 bcf increase. This also exceeded the five-year average build of 79 bcf for this time of year. As of May 2, inventories were down by 16.5% year-over-year but were 1.4% above the five-year seasonal average, indicating sufficient natural gas supplies. In Europe, gas storage levels were reported at 43% full as of May 11, compared to a five-year seasonal average of 53%.
Rig Counts and Industry Trends
Baker Hughes reported that the number of active U.S. natural gas drilling rigs held steady at 101 for the week ending May 9. This figure remains modestly above the four-year low of 94 rigs reached on September 6, 2024. Since hitting a 5.5-year high of 166 rigs in September 2022, active rigs have declined from the pandemic-related low of 68 rigs in July 2020, as recorded 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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