Oct Nymex natural gas (NGV22) on Monday closed up by +0.253 (+3.16%).
Oct nat-gas prices Monday rallied sharply on expectations for increased nat-gas demand from electricity providers to power air-conditioning. Â Forecaster Atmospheric G2 said Monday that above-normal temperatures are expected across the central and eastern U.S. from September 17-21. Â Technical buying Monday accelerated gains after nat-gas prices climbed above $8/mmbtu.
Lower-48 state total gas production on Monday was 100.1 bcf, up +6.5% y/y. Â On Sunday, lower-48 state total gas production climbed to a record 100.9 bcf. Â Lower-48 state total gas demand on Monday was 67.2 bcf/day, up +6.6% y/y. Â LNG net flow to U.S. LNG export terminals Monday was 11.6 bcf/day, up +0.3% w/w.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. Â The Edison Electric Institute reported last Thursday that total U.S. electricity output in the week ended Sep 3 rose +4.8% y/y to 88,595 GWh (gigawatt hours). Â Also, cumulative U.S. electricity output in the 52-week period ending Sep 3 rose +3.0% y/y to 4,122,790 GWh.
Nat-gas prices have support as EU countries agreed to cut nat-gas demand from Russia by 15% over the next eight months. Â Also, Russia recently slashed nat-gas exports to Europe to 20% of capacity, putting upward pressure on European nat-gas prices. Â Russia has already halted nat-gas shipments to Demark, Finland, Bulgaria, Netherlands, Poland, and Latvia and reduced supplies to Germany for not acceding to its demand for gas payments in Russian rubles.
Nat-gas prices have seen downward pressure from the prolonged outage at the Freeport LNG export terminal, which curbed U.S nat-gas exports and put upward pressure on domestic supplies. Â The Freeport terminal accounted for about 20% of all U.S. nat-gas exports before the explosion on June 8 knocked it offline. Â The Freeport LNG terminal receives about 2 bcf, or 2.5%, of the output from the lower-48 U.S. states. Â The Freeport terminal said Aug 23 that it won't reopen until early to mid-November, later than a previous announcement of a restart in October.
As a longer-term bullish factor, the ongoing drought in the U.S. West has drained rivers and reservoirs, with Lake Mead and Lake Powell falling to record lows. Â That threatens to curb power produced by hydropower dams and will prompt electric utilities in the U.S. West to boost usage of nat-gas to increase electricity to satisfy power demand for air-conditioning this summer. Â The U.S. Energy Information Administration said on June 1 that the drought could drive down generation at California's hydro dams between June and September to 7 million megawatt-hours, well below the 13 million megawatt-hour median for summer generation between 1980 and 2020.
Last Thursday's weekly EIA report was bullish for nat-gas prices as it showed U.S. nat gas inventories rose +54 bcf to 2,694 bcf in the week ended Sep 2, below expectations of a +55 bcf increase and the 5-year average gain for this time of year at +65 bcf. Â Inventories remain tight and are down -7.8% y/y and -11.5% below their 5-year seasonal average.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended Sep 9 rose by +4 rigs to a new 3-year high of 166 rigs. Â Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).
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