June Nymex natural gas (NGM25) on Tuesday closed up by +0.064 (+1.92%).
June nat-gas prices on Tuesday recovered from early losses and settled higher. Short-covering emerged in nat-gas futures Tuesday due to forecasts for warmer US temperatures, which could boost nat-gas demand from electricity providers to run air conditioning. NatGasWeather said Tuesday that most of the lower 48 US states will see above-normal temperatures from June 4-9.
Nat-gas prices initially moved lower Tuesday on signs of abundant US nat-gas supplies. Weekly EIA mat-gas inventories rose by +120 bcf for the week ended May 16, well above the five-year average for this time of year of +87 bcf, putting nat-gas inventories +3.9% above their 5-year seasonal average,.
Lower-48 state dry gas production Tuesday was 106.3 bcf/day (+3.7% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 66.2 bcf/day (+1.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 14.7 bcf/day (-1.8% 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 last Wednesday that total US (lower-48) electricity output in the week ended May 17 rose +2.5% y/y to 75,855 GWh (gigawatt hours), and US electricity output in the 52-week period ending May 17 rose +3.67% y/y to 4,253,433 GWh.
Last Thursday’s weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 16 rose +120 bcf, slightly above expectations of +119 bcf and well above the 5-year average build for this time of year of +87 bcf. As of May 16, nat-gas inventories were down -12.7% y/y and +3.9% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 46% full as of May 25, versus the 5-year seasonal average of 58% 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 23 fell -2 to 98 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).
