June Nymex natural gas (NGM25) on Wednesday closed down sharply by -0.194 (-5.71%).
June nat-gas prices on Wednesday gave up an early advance and sold off to a 1-week low as fund liquidation weighed on prices ahead of the expiration of the June nat-gas contract.
Expectations for a larger-than-normal build in weekly nat-gas inventories also weighed on prices. The consensus is that Thursday’s weekly EIA nat-gas inventories will climb by +107 bcf for the week ended May 23, above the five-year average for this time of year of +98 bcf.
Losses in nat-gas prices accelerated Wednesday after weather forecasts turned cooler in the east and central parts of the US, which could curb nat-gas demand from electricity providers to run air conditioning. Forecaster Atmospheric G2 said Wednesday that temperatures shifted cooler over the central and eastern parts of the US for June 2-6.
Lower-48 state dry gas production Wednesday was 106.3 bcf/day (+3.5% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 68.4 bcf/day (+2.8% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 14.5 bcf/day (-3.5% 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 47% full as of May 26, 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).
