Hot US Temps and Middle East Tensions Boost Nat-Gas Prices

July Nymex natural gas (NGN25) on Tuesday closed up by +0.103 (+2.75%).
July nat-gas prices on Tuesday rallied sharply for a third session and posted a 2-1/4 month nearest-futures high. Nat-gas prices rallied on expectations for hot weather in the US, which will boost nat-gas demand from electricity providers to run air-conditioning. The Commodity Weather Group said Tuesday that forecasts shifted hotter for much of the eastern half of the US for June 22-26.
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Nat-gas prices also had carryover support from a rally in European natural gas prices Tuesday to a 2-1/2 month high. European gas rallied on supply concerns after Israel attacked Iran's South Pars gas field, forcing the halt of a production platform. Also, there is concern that any attempt by Iran to close the Strait of Hormuz could disrupt LNG shipments through that Strait, which accounts for about 20% of global LNG trade. In addition, Israel temporarily shut down its Leviathan gas field due to security concerns, which disrupted gas pipeline shipments to Egypt.
Lower-48 state dry gas production Tuesday was 105.8 bcf/day (+2.3% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 75.1 bcf/day (-0.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.4 bcf/day (-1.7% w/w), according to BNEF.
A decline in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended June 7 fell -2.7% y/y to 82,114 GWh (gigawatt hours), although US electricity output in the 52-week period ending June 7 rose +3.0% y/y to 4,246,137 GWh.
The consensus is that Wednesday's weekly EIA nat-gas inventories (move forward a day due to Thursday's Juneteenth holiday) will climb by +96 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 6 rose +109 bcf, above expectations of +108 bcf and well above the 5-year average build for this time of year of +87 bcf. As of June 6, nat-gas inventories were down -9.0% y/y and +5.4% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 52% full as of June 10, versus the 5-year seasonal average of 62% 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 June 13 fell by -1 to 113, falling back from the previous week's 15-month high of 114 rigs. In the past nine months, gas rigs have risen from the 4-year low of 94 rigs posted 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. This article was originally published on Barchart.com

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