Rich Asplund
3 min read
July Nymex natural gas (NGN25) on Tuesday closed up by +0.103 (+2.75%).
July nat-gas prices on Tuesday rallied sharply for a third session and posted a 2-1/4 month nearest-futures high. Nat-gas prices rallied on expectations for hot weather in the US, which will boost nat-gas demand from electricity providers to run air-conditioning. The Commodity Weather Group said Tuesday that forecasts shifted hotter for much of the eastern half of the US for June 22-26.
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Nat-gas prices also had carryover support from a rally in European natural gas prices Tuesday to a 2-1/2 month high. European gas rallied on supply concerns after Israel attacked Iran's South Pars gas field, forcing the halt of a production platform. Also, there is concern that any attempt by Iran to close the Strait of Hormuz could disrupt LNG shipments through that Strait, which accounts for about 20% of global LNG trade. In addition, Israel temporarily shut down its Leviathan gas field due to security concerns, which disrupted gas pipeline shipments to Egypt.
Lower-48 state dry gas production Tuesday was 105.8 bcf/day (+2.3% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 75.1 bcf/day (-0.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.4 bcf/day (-1.7% w/w), according to BNEF.
A decline in US electricity output is negative 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 June 7 fell -2.7% y/y to 82,114 GWh (gigawatt hours), although US electricity output in the 52-week period ending June 7 rose +3.0% y/y to 4,246,137 GWh.
The consensus is that Wednesday's weekly EIA nat-gas inventories (move forward a day due to Thursday's Juneteenth holiday) will climb by +96 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 6 rose +109 bcf, above expectations of +108 bcf and well above the 5-year average build for this time of year of +87 bcf. As of June 6, nat-gas inventories were down -9.0% y/y and +5.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 52% full as of June 10, versus the 5-year seasonal average of 62% full for this time of year.
