Forecasts for Cooler US Temps Hammer Nat-Gas Prices

Rich Asplund Barchart Mon Jun 30, 2:18PM CDT
Jack up drilling rigs off coast by Elliot Day via Pixabay

August Nymex natural gas (NGQ25) on Monday closed sharply lower by -0.283 (-7.57%).

Aug nat-gas prices plunged on Monday on speculation that forecasts for cooler US temperatures will curb nat-gas demand from electricity providers to power air conditioning and allow US nat-gas inventories to keep rebuilding.   Forecaster Atmospheric G2 said Monday that forecasts shifted cooler across the central and eastern US for July 10-14.  As of June 20, EIA nat-gas inventories were +6.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  Nat-gas prices were also weighed down by carryover weakness from Monday's fall in European nat-gas prices to an 8-week low.

Lower-48 state dry gas production on Monday was 107.4 bcf/day (+3.9% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 74.3 bcf/day (+6.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 14.7 bcf/day (+9.2% 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 June 21 fell -3.1% y/y to 91,334 GWh (gigawatt hours), although US electricity output in the 52-week period ending June 21 rose +2.6% y/y to 4,243,923 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 20 rose +96 bcf, above the consensus of +88 bcf and the 5-year average for the week of +79 bcf.  As of June 20, nat-gas inventories were down -6.6% y/y, but were +6.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of June 23, gas storage in Europe was 57% full, compared to the 5-year seasonal average of 66% 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 June 27 fell by -2 to 109 rigs, slightly below the 15-month high of 114 rigs from June 6.  In the past nine months, gas rigs have risen from the 4-year low of 94 rigs posted 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.