Natural Gas Prices Surge Amid Rising Demand and Weather Predictions
June Nymex natural gas (NGM25) closed on Friday at +0.203 (+5.65%). This increase brought nat-gas prices to a 4-week high, driven by expectations of above-normal temperatures in the United States, which are anticipated to raise electricity demand for air conditioning. Forecaster Xweather indicated that temperatures will remain above normal across the eastern half of the US through May 18, further increasing nat-gas demand from electricity providers.
According to BNEF, Lower-48 state dry gas production on Friday was recorded at 105.4 bcf/day, representing a +5.1% increase year-over-year. However, gas demand on the same day was reported at 66.0 bcf/day, which is down -6.4% year-over-year. Net flows of liquefied natural gas (LNG) to US export terminals were also noted at 15.3 bcf/day, up +4.0% week-over-week.
As US electricity output increases, this trend is favorable for nat-gas demand from utility companies. The Edison Electric Institute reported that total electricity output across the lower-48 states rose by +1.2% year-over-year to 74,373 GWh for the week ending May 3. Over the previous 52-week period, output climbed +3.7% year-over-year to 4,253,707 GWh.
In a bearish turn for nat-gas prices, the weekly EIA report released on Thursday indicated that nat-gas inventories increased by +104 bcf for the week ending May 2. This exceeded expectations of +101 bcf and was significantly above the 5-year average build of +79 bcf for this time of year. As of May 2, inventories were down -16.5% year-over-year yet still +1.4% above their 5-year seasonal average, suggesting sufficient nat-gas supplies. In Europe, as of May 5, gas storage was reported to be 41% full, compared to the 5-year average of 51% for this season.
Baker Hughes indicated on Friday that the number of active US nat-gas drilling rigs remained unchanged at 101 for the week ending May 9. This figure is modestly above the 4-year low of 94 rigs recorded on September 6, 2024. Active rigs have decreased from a 5.5-year high of 166 rigs in September 2022, following a decline from the record low of 68 rigs in July 2020, which has been tracked 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 details, please refer to the Barchart Disclosure Policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
