September Nymex natural gas (NGU25) on Friday closed down -0.023 (-0.74%).
Sep nat-gas prices on Friday gave up an early advance and moved lower as US nat-gas output continues to increase year-over-year and current gas supplies are well above normal. As of July 25, nat-gas inventories were +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.
Nat-gas prices initially moved higher on Friday due to forecasts for hot US weather, which will boost nat-gas demand from electricity providers to power air-conditioning usage. On Friday, forecaster Atmospheric G2 said that forecasts shifted warmer for the Midwest, Southwest, and Texas for August 6-10, and forecasts turned hotter across much of the eastern half of the US for August 11-15.
On Thursday, nat-gas prices tumbled to a 3.25-month low after weekly nat-gas supplies rose more than expected. Also, higher US nat-gas production is weighing on prices as recent US nat-gas output is up year-over-year. Moreover, expectations for even higher US nat-gas production are also weighing on nat-gas prices after Friday’s weekly report from Baker Hughes showed that the number of active US nat-gas drilling rigs in the week ending August 1 rose by +2 to a 2-year high of 124 rigs.
Lower-48 state dry gas production on Friday was 108.1 bcf/day (+3.4% y/y), according to BNEF. Lower-48 state gas demand on Friday was 76.1 bcf/day (-13.0% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Friday were 15.2 bcf/day (+2.3% 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 26 rose +8.1% y/y to 98,772 GWh (gigawatt hours), and US electricity output in the 52-week period ending July 26 rose +2.7% y/y to 4,258,448 GWh.
Thursday’s weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended July 25 rose +48 bcf, above the consensus of +41 bcf and the 5-year average of +24 bcf for the week. As of July 25, nat-gas inventories were down -3.9% y/y, but were +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of July 30, gas storage in Europe was 68% full, compared to the 5-year seasonal average of 76% full for this time of year.
