Nat-Gas Prices Slump on Ample Supplies and Cool Spring Temps

Rich Asplund Barchart Mon May 19, 2:19PM CDT
Jack up drilling rigs off coast by Elliot Day via Pixabay

June Nymex natural gas (NGM25) on Monday closed down by -0.221 (-6.63%).

June nat-gas prices on Monday extended their week-long slide to a 3-week low and settled sharply lower.  Ample supplies and forecasts for cool US spring temperatures to continue are weighing on nat-gas prices.   EIA nat-gas inventories as of May 9 are +2.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  Also, the Commodity Weather Group said that on Monday, forecasts shifted cooler for the southern US for May 29-June 2, reducing electricity demand to power air conditioning.  

Lower-48 state dry gas production Monday was 106.3  bcf/day (+5.5% y/y), according to BNEF.  Lower-48 state gas demand Monday was 65.5 bcf/day (+1.3% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 15.2 bcf/day (+1.2% w/w), according to BNEF.

A decline in US electricity output is negative for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended May 10 fell -2.8% y/y to 72,735 GWh (gigawatt hours), although US electricity output in the 52-week period ending May 10 rose +3.6% y/y to 4,251,600 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 9 rose +110 bcf, right on expectations but well above the 5-year average build for this time of year of +83 bcf.  As of May 9, nat-gas inventories were down -14.6% y/y and +2.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  In Europe, gas storage was 44% full as of May 14, versus the 5-year seasonal average of 54% 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 16 fell -1 to 100 rigs, modestly above the 4-year low of 94 rigs posted on September 6, 2024.  Active rigs have fallen since posting a 5-1/2 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data 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 is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.