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Smaller-Than-Expected Build in EIA Inventories Lifts Nat-Gas Prices

August Nymex natural gas (NGQ25) on Thursday closed up sharply by +0.123 (+3.83%).

Aug nat-gas prices on Thursday settled sharply higher due to a smaller-than-expected build in weekly inventories.  The EIA reported that nat-gas inventories rose by +53 bcf in the week ended July 4, below expectations of +61 bcf.  Forecasts for hotter temperatures in the West also gave nat-gas prices a boost after forecaster Vaisala said above-normal temperatures are expected to persist in the West July 20-24.

On Wednesday, nat-gas prices tumbled to a 6-week low due to cooler US weather forecasts after Vaisala said that forecasts shifted cooler in the Midwest for July 14-18 and weather outlooks shifted cooler for the eastern half of the US for July 19-23.  The cooler temperatures should reduce nat-gas demand from electricity providers to power air conditioning.

Lower-48 state dry gas production on Thursday was 106.3 bcf/day (+4.1% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 76.8 bcf/day (-8.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 15.5 bcf/day (+4.0% 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 July 5 rose +1.0% y/y to 93,747 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 5 rose +2.4% y/y to 4,247,938 GWh.

Thursday’s weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended July 4 rose +53 bcf, below the consensus of +61 bcf and right on the 5-year average for the week.  As of July 4, nat-gas inventories were down -6.0% y/y, but were +6.1% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 8, gas storage in Europe was 61% full, compared to the 5-year seasonal average of 71% full for this time of year.

Baker Hughes reported last Thursday that the number of active US nat-gas drilling rigs in the week ending July 4 fell by -1 to 108 rigs, slightly below the 15-month high of 114 rigs posted on June 6.  In the past nine months, the number of gas rigs has risen from the 4-year low of 94 rigs reported in September 2024.

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