Nat-Gas Rallies as EIA Inventories Climb Less Than the Long-Term Average

Rich Asplund - Barchart - Thu May 2, 2:24PM CDT

June Nymex natural gas (NGM24) on Thursday closed up by +0.103 (+5.33%).

June nat-gas prices rallied sharply Thursday after weekly EIA nat-gas inventories increased at a slower pace than the five-year average, helping to limit a supply glut. The EIA reported Thursday that nat-gas inventories for the week ended April 26 rose by +59 bcf, below the 5-year average build for this time of year of +72 bcf.

May nat gas prices last Friday tumbled to a 3-3/4 year nearest-futures low (NGK24) due to ample US nat-gas supplies and mild spring temperatures. Nat-gas prices have collapsed this year after an unusually mild winter curbed heating consumption for nat-gas and pushed inventories well above average.

Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas on March 1 shut down one of its three production units due to damage from extreme cold in Texas. The unit recently reopened on a partial basis. However, Freeport said that once the production unit is fully reopened, the other two units will be taken down for maintenance, and all three units will not return online until late May. The lack of full capacity of the Freeport export terminal limits US nat-gas exports and boosts US nat-gas inventories.

Lower-48 state dry gas production Thursday was 98.5 bcf/day (-2.9% y/y), according to BNEF. Lower-48 state gas demand Thursday was 68.2 bcf/day (-5.6% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 12.3 bcf/day (+4.5% 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 electricity output in the week ended April 27 rose +1.81% y/y to 69,594 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending April 27 fell -0.2% y/y to 4,097,611 GWh.

Thursday's weekly EIA report was neutral for nat-gas prices since nat-gas inventories for the week ended April 26 rose by +59 bcf, close to expectations of +58 bcf, but below the 5-year average build for this time of year of +72 bcf. As of April 26, nat-gas inventories were up +20.4% y/y and were +34.9% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 62% full as of April 29, above the 5-year seasonal average of 47% 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 April 26 fell by -1 rig to a 2-1/4 year low of 105 rigs. Active rigs have fallen since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).

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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.