Natural Gas Prices Close Moderately Higher on a Smaller-Than-Expected Build in Weekly EIA Inventories

September Nymex natural gas (NGU21) on Thursday closed up +0.092 (+2.32%).

Sep nat-gas prices on Thursday settled moderately higher after the EIA reported that weekly nat-gas inventories rose +36 bcf, below expectations of +42 bcf.  Nat-gas prices also have support on forecasts for warm U.S. temperatures as the Global Forecast System weather model shifted to warmer temperatures for the Northeast, West, and Plains for August 2-6.  Also, temperatures shited to hotter in the West, Plains, and East from August 7-11.  Concerns are building that a warmer-than-expected U.S. summer will draw down nat-gas supplies ahead of this winter when nat-gas demand is strong for heating.

NOAA projects that the ongoing drought in the West will likely last into October, which will cut hydro-power generation and boost nat-gas demand from electricity providers.  NOAA said that the contiguous U.S. had its warmest June in 127 years of records.

Foreign demand for U.S. nat-gas supplies fell slightly on Thursday.  Gas flows to U.S LNG export terminals on Thursday were 10.6 bcf, down -1.9% w/w, according to BNEF.  On Apr 18, gas flows to U.S LNG export terminals climbed to a record 11.921 bcf (data from 2014).

A decline in U.S. electricity output is negative for nat-gas demand from utility providers after the Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended July 24 fell -3.4% y/y to 89,7813 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending July 24 rose +0.7% y/y to 3,992,530 GWh.

Weakness in domestic nat-gas demand is negative for prices as BNEF data shows lower-48 U.S. nat-gas consumption on Thursday was down -5.6% y/y at 70.7 bcf.

U.S. lower-48 gas production on Thursday was at 91.687 bcf, up +2.9% y/y, according to BNEF.

Thursday's weekly EIA report was supportive for prices as it showed that U.S. nat gas inventories rose +36 bcf to 2,7148 bcf in the week ended July 23, below the consensus of +42 bcf.  Supplies remain tight, with inventories down -16.3% y/y and -5.8% below their 5-year average.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ended July 23 remained unchanged at a 1-1/4 year high of 104 rigs, well above the record low of 68 rigs posted in July 2020 (data since 1987).