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Nat-Gas Prices Sink on the Outlook for Cooler US Temps and Higher Gas Production

August Nymex natural gas (NGQ25) on Monday closed down -0.240 (-6.73%).

Aug nat-gas prices plunged to a 1-week low Monday on the outlook for cooler US temperatures, which will curb nat-gas demand from electricity providers to provide increased air-conditioning usage.  Forecaster Vaisala said forecasts shifted cooler in the West for July 26-30, and an active storm track could signal cooler risks in the Midwest and Northeast for July 31 to August 4.  

Expectations for higher US nat-gas production are also weighing on nat-gas prices after last Friday’s weekly report from Baker Hughes showed that the number of active US nat-gas drilling rigs in the week ending July 18 rose by +9 to a 17-month high of 117 rigs.

Lower-48 state dry gas production on Monday was 107.4 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 77.7 bcf/day (1.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 14.9 bcf/day (-4.9% 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 July 12 rose +1.1% y/y to 98,133 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 12 rose +2.4% y/y to 4,248,982 GWh.

Last Thursday’s weekly EIA report was slightly bearish for nat-gas prices since nat-gas inventories for the week ended July 11 rose +46 bcf, above the consensus of +45 bcf and the 5-year average of +41 bcf for the week.  As of July 11, nat-gas inventories were down -4.9% y/y, but were +6.2% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 17, gas storage in Europe was 65% full, compared to the 5-year seasonal average of 73% 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 July 18 rose by +9 to a 17-month high of 117 rigs.  In the past ten months, the number of gas rigs has risen from the 4-year low of 94 rigs reported in September 2024.

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