May Nymex natural gas (NGK25) on Friday closed down -0.301 (-7.27%).
May nat-gas prices plunged to a 1-week low Friday on global trade war concerns and forecasts for warmer US temperatures, which could curb heating demand for nat-gas. Trade war concerns hammered equity markets for the past two days and sparked risk-off sentiment in asset markets, undercutting nat-gas prices. Also, the Commodity Weather Group said Friday that forecasts for the eastern half of the US shifted warmer for April 14-18.
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Last month, 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 106.4 bcf/day (+4.3 y/y), according to BNEF. Lower-48 state gas demand Friday was 74.5 bcf/day (-11.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 15.5 bcf/day (-2.2% 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 March 22 rose +0.9% y/y to 72,289 GWh (gigawatt hours), and US electricity output in the 52-week period ending March 22 rose +3.55% y/y to 4,239,323 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 bearish for nat-gas prices since nat-gas inventories for the week ended March 28 rose +29 bcf, a larger build than expectations of +28 bcf and well above the 5-year average draw for this time of year for a -13 bcf draw. As of March 28, nat-gas inventories were down -21.5% y/y and -4.3% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 34% full as of April 1, versus the 5-year seasonal average of 45% full for this time of year.
Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending April 4 fell -7 to a 6-1/2 month low of 96 rigs, just above the 3-1/2 year low of 94 rigs posted on September 6, 2024. Active rigs have fallen since posting a 5-1/4 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).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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