May Nymex natural gas (NGK26) on Wednesday closed up +0.025 (+0.93%).
Nat-gas prices climbed to a 2-week high on Wednesday and settled higher. The outlook for the Strait of Hormuz to remain closed for the foreseeable future will curb Middle Eastern nat-gas supplies, potentially boosting US nat-gas exports to make up for the shortfall.
Gains in nat-gas prices were limited on Wednesday due to the outlook for warmer US weather, which is expected to reduce nat-gas heating demand. The Commodity Weather Group said Wednesday that above-average temperatures are expected across the eastern half of the US through April 26. Also, an expected larger-than-normal build in US nat-gas storage is bearish for prices. The consensus is that Thursday's weekly EIA nat-gas inventories rose by +97 bcf in the week ended April 17, well above the five-year average for the week of +64 bcf.
Last Tuesday, nat-gas prices sank to a 17-month low due to above-normal spring temperatures that have reduced US nat-gas heating demand and expanded storage levels, with nat-gas inventories 5.8% above their 5-year seasonal average as of April 10.
Projections for higher US nat-gas production are negative for prices. On April 7, the EIA raised its forecast for 2026 US dry nat-gas production to 109.59 bcf/day from a March estimate of 109.49 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high in late February.
US (lower-48) dry gas production on Wednesday was 110.3 bcf/day (+3.3% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 68.4 bcf/day (+2.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 20.1 bcf/day (+1.6% w/w), according to BNEF.
Nat-gas prices have some medium-term support on the outlook for tighter global LNG supplies. On March 19, Qatar reported "extensive damage" at the world's largest natural gas export plant at Ras Laffan Industrial City. Qatar said the attacks by Iran damaged 17% of Ras Laffan's LNG export capacity, a damage that will take three to five years to repair. The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports. Also, the closure of the Strait of Hormuz due to the war in Iran has sharply curtailed nat-gas supplies to Europe and Asia.
As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended April 18 rose +6.5% y/y to 77,299 GWh (gigawatt hours), and US electricity output in the 52 weeks ending April 18 rose +1.8% y/y to 4,327,186 GWh.
Last Thursday's weekly EIA report was neutral to bearish for nat-gas prices, as nat-gas inventories for the week ended April 10 rose by +59 bcf, right on expectations but well above the 5-year weekly average of +38 bcf. As of April 10, nat-gas inventories were up +6.7% y/y, and +5.8% above their 5-year seasonal average, signaling ample nat-gas supplies. As of April 20, gas storage in Europe was 31% full, compared to the 5-year seasonal average of 43% 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 April 17 fell by -2 to 125, modestly below the 2.5-year high of 134 rigs set on February 27. In the past 19 months, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.
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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