June Nymex natural gas (NGM25) on Wednesday closed downy by -0.314 (+10.09%).

June nat-gas prices on Wednesday gave up an early advance and settled lower, giving back some of Tuesday’s sharp gains.  Long liquidation pressures emerged in nat-gas futures on expectations that EIA nat-gas inventories will continue to build.  The consensus is that Thursday’s EIA nat-gas inventories will climb by +119 bcf for the week ended May 16, well above the five-year average for this time of year of +87 bcf.  

Nat-gas prices Wednesday initially extended Tuesday’s sharp gains on forecasts for warm weather that would boost nat-gas demand from electricity providers to run air conditioning.  On Wednesday, forecaster Atmospheric G2 said forecasts shifted warmer for the Northeast, South, and West for May 26-30, with temperatures well above normal for the central and Midwest.  

Lower-48 state dry gas production Wednesday was 105.5  bcf/day (+4.4% y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 67.5 bcf/day (-3.8% y/y), according to BNEF.  LNG net flows to US LNG export terminals Wednesday were 14.8 bcf/day (+1.8% 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 May 17 rose +2.5% y/y to 75,855 GWh (gigawatt hours), and US electricity output in the 52-week period ending May 17 rose +3.67% y/y to 4,253,433 GWh.

Last Thursday’s weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended May 9 rose +110 bcf, right on expectations but well above the 5-year average build for this time of year of +83 bcf.  As of May 9, nat-gas inventories were down -14.6% y/y and +2.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  In Europe, gas storage was 45% full as of May 18, versus the 5-year seasonal average of 55% 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 May 16 fell -1 to 100 rigs, modestly above the 4-year low of 94 rigs posted on September 6, 2024.  Active rigs have fallen since posting a 5-1/2 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).

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