Hopes of US-China Trade Talks Spurs Risk-On Sentiment and Boosts Nat-Gas Prices
June Nymex natural gas (NGM25) on Friday closed up sharply by +0.151 (+4.34%).
June nat-gas prices on Friday rallied sharply for a second session and posted a 2-1/2 week high. Nat-gas prices found support Friday on news that China is evaluating possible trade talks with the US, which sparked risk-on sentiment in asset markets.
Last Thursday, nat-has prices tumbled to a 5-month nearest-futures low as the warm US spring weather has dampened heating demand for nat-gas and allowed supplies to rebuild. NatGasWeather said Wednesday that near-normal weather across the US through May 14 will keep demand for nat-gas light, allowing inventories to climb even more.
In March, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season. BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.
Lower-48 state dry gas production Friday was 105.5 bcf/day (+5.2% y/y), according to BNEF. Lower-48 state gas demand Friday was 63.2 bcf/day (-9.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 15.1 bcf/day (-0.7% 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 April 26 rose +5.2% y/y to 73,210 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 26 rose +3.8% y/y to 4,252,848 GWh.
In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration’s pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.
Thursday’s weekly EIA report was mixed for nat-gas prices since nat-gas inventories for the week ended April 25 rose +107 bcf, below expectations of +109 bcf but well above the 5-year average build for this time of year of +58 bcf. As of April 25, nat-gas inventories were down -17.8% y/y and +0.2% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 39% full as of April 29, versus the 5-year seasonal average of 49% full for this time of year.
Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending May 2 rose +2 to 101 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).
