Nat-Gas Prices Tumble on Cooler US Temps and Building Inventories

Rich Asplund Barchart Wed Jul 9, 2:35PM CDT
Natural gas close up burner by Freer Law via iStock

August Nymex natural gas (NGQ25) on Wednesday closed down by -0.126 (-3.77%).

Aug nat-gas prices on Wednesday tumbled to a 6-week low and settled sharply lower due to cooler US weather forecasts and the outlook for higher nat-gas inventories.   Forecaster Vaisala said Wednesday that forecasts shifted cooler in the Midwest for July 14-18 and weather outlooks shifted cooler for the eastern half of the US for July 19-23.  The cooler temperatures should reduce nat-gas demand from electricity providers to power air conditioning.

The outlook for higher US nat-gas inventories is also bearish for prices.  The consensus is that Thursday’s weekly EIA nat-gas inventories will climb by +61 bcf for the week ended July 4, above the five-year average for this time of year of +53 bcf.

Lower-48 state dry gas production on Wednesday was 105.3 bcf/day (+3.6% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 77.5 bcf/day (-8.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 15.0 bcf/day (+0.9% 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 (lower-48) electricity output in the week ended July 5 rose +1.0% y/y to 93,747 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 5 rose +2.4% y/y to 4,247,938 GWh.

Last Thursday’s weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 27 rose +55 bcf, above the consensus of +49 bcf but below the 5-year average for the week of +61 bcf.  As of June 27, nat-gas inventories were down -5.8% y/y, but were +6.2% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 6, gas storage in Europe was 61% full, compared to the 5-year seasonal average of 70% full for this time of year.

Baker Hughes reported last Thursday that the number of active US nat-gas drilling rigs in the week ending July 4 fell by -1 to 108 rigs, slightly below the 15-month high of 114 rigs posted on June 6.  In the past nine months, the number of gas rigs has risen from the 4-year low of 94 rigs reported in September 2024.
 


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.