Nat-Gas Prices Give Up Early Gains on a Mixed Weather Outlook

Rich Asplund - Barchart - Tue May 14, 2:16PM CDT

June Nymex natural gas (NGM24) on Tuesday closed down -0.037 (-1.55%).

June nat-gas prices on Tuesday fell back from a 3-1/2 month nearest-futures high and posted moderate losses as a mixed weather outlook sparked long liquidation in nat-gas futures. Maxar Technologies said Tuesday that forecasts shifted warmer for the eastern half of the US and Texas from May 19-23 but trended cooler in much of the western part of the country.

Nat-gas prices have rebounded higher from the 3-3/4 year nearest-futures low (NGK24) posted on April 26. Nat-gas prices collapsed over the winter after unusually mild winter temperatures curbed heating demand for nat-gas and pushed inventories well above average.

Lower-48 state dry gas production Tuesday was 99 bcf/day (-1.9% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 64.9 bcf/day (+2.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 12.3 bcf/day (-1.0% w/w), according to BNEF.

Nat-gas prices were 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.

An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US electricity output in the week ended May 4 rose +5.47% y/y to 73,515 GWh (gigawatt hours), although cumulative US electricity output in the 52-week period ending May 4 fell -0.04% y/y to 4,101,422 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended May 3 rose by +79 bcf, below expectations of +86 bcf and below the 5-year average build for this time of year of +81 bcf. As of May 3, nat-gas inventories were up +19.7% y/y and were +33.3% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 64% full as of May 12, above the 5-year seasonal average of 51% 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 May 10 rose by +1 rig to 103 rigs, slightly above the 2-1/2 year low of 102 rigs posted in the week ending May 3. 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.