August Nymex natural gas (NGQ24) on Friday closed down by -0.084 (-3.13%).

Aug nat-gas prices Friday extended this week's decline to a 3-1/2 week low. Elevated US nat-gas inventories are pressuring prices. As of June 21, nat-gas inventories were +20.6% above their 5-year seasonal average, signaling ample nat-gas supplies.

Losses in nat-gas prices Friday were limited by forecasts for hotter US temperatures, which will boost nat-gas demand from electricity providers to run air-conditioning. NatGasWeather said Friday that weather models were showing hotter-than-normal weather for most of the US from July 5-12.

The outlook for hot summer temperatures in the US is a bullish factor for nat-gas prices. The National Weather Service (NWS) said on June 11 that "the vast majority of the lower 48 US states could see above-average temperatures for the next three months, and for a good portion of states, a hotter-than-normal summer is the most likely scenario."

Lower-48 state dry gas production Friday was 100.7 bcf/day (+0.3% y/y), according to BNEF. Lower-48 state gas demand Friday was 71.5 bcf/day (+0.4% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 12.9 bcf/day (+8.9% 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 electricity output in the week ended June 22 rose +12.6% y/y to 94,220 GWh (gigawatt hours), and US electricity output in the 52-week period ending June 22 rose +1.85% y/y to 4,137,658 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended June 21 rose by +52 bcf, below expectations of +54 bcf and below the 5-year average build for this time of year of +85 bcf. However, as of June 21, nat-gas inventories were up +10.4% y/y and were +20.6% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 76% full as of June 24, above the 5-year seasonal average of 65% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending June 28 fell -1 rig to a 2-3/4 year low of 97 rigs. Active rigs have fallen since climbing to a 4-3/4 year high of 166 rigs in Sep 2022 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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