
June Nymex natural gas (NGM22) on Thursday closed up +0.099 (+1.30%).
Nat-gas prices Thursday recovered from early losses and closed moderately higher. A rally in the dollar index Thursday to a 19-year high weighed on nat-gas prices early. However, nat-gas prices recovered and moved higher on carry-over support from a +14% surge in European nat-gas prices after Russia halted gas flows to Germany. Nat-gas prices also garnered support from Thursday's weekly EIA inventory data that showed nat-gas inventories rose +76 bcf, below expectations of a +81 bcf increase.
Forecasts for hot U.S. temperatures that will boost nat-gas demand from electricity producers to run increased air-conditioning are supportive of prices. The Commodity Weather Group said Wednesday that above-normal temperatures are seen for the U.S. South through May 20, with near-record high temperatures from the Southern Plains to the Midwest this week.
In a bullish factor, the ongoing drought in the U.S. West has drained rivers and reservoirs, with Lake Mead last week falling to a record low. 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.
The Energy Information Administration on Tuesday said that "natural gas demand will exceed supply through 2022" and projected that U.S. nat-gas futures would average $7.42 million British thermal units this year, 42% higher than a previous forecast a month ago.
Nat-gas prices have support after Russia recently said that foreign buyers of its gas would need to open special ruble and foreign currency accounts by the end of this month to buy Russian gas. Russia has already halted nat-gas shipments to Bulgaria and Poland for not paying for Russian gas in rubles. Russian President Putin said that "unfriendly" nations must pay for nat-gas in rubles, which keeps alive the possibility of disruptions to Russian gas supplies to Europe.
Strong foreign demand for U.S. nat-gas supplies is bullish for prices after BNEF data showed gas flows to U.S. export terminals Thursday rose by +13.9% y/y to 11.597 bcf.
Increased U.S. gas production is bearish for prices as BNEF data show U.S. lower-48 nat-gas production Thursday at 94.8 bcf, up +3.1% y/y.
Lower U.S. domestic nat-gas demand is bearish for prices as BNEF data shows lower 48-state nat-gas demand Thursday was 60.3 bcf, down -6.9% y/y.
An increase in U.S. electricity output is bullish for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended May 7 rose +3.2% y/y to 72,564 GWh (gigawatt hours). Also, cumulative U.S. electricity output in the 52-week period ending May 7 rose +2.5% y/y to 4,076,407 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices as it showed U.S. nat gas inventories rose +76 bcf to 1,643 bcf in the week ended May 6, below expectations of +79 bcf. Also, inventories remain tight and are down -19.0% y/y and -16.0% 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 May 6 rose by +2 rigs to a new 2-1/2 year high of 146 rigs. Active rigs have recovered sharply from the record low of 68 rigs posted in July 2020 (data since 1987).