U.S. Dry Natural Gas Production Sets 6% YoY Record in May, Reports EIA

US dry natural gas production rose 5.7% YoY in May, according to the EIA. This increase is attributed to higher gas output from the Marcellus and Haynesville shale formations. The EIA's monthly report also shows that gas production in the Permian Basin rose 11.3% YoY in May.

Title: US Natural Gas Prices Recover Amid Forecasts for Hotter US Weather

US natural gas prices have shown a significant rebound, closing up +0.061 (+2.00%) on Thursday, September 25, according to the Nymex. This recovery was driven by forecasts for warmer US weather, which is expected to boost demand for natural gas to power air-conditioning usage. The forecasts from Atmospheric G2 indicated that the western half of the US, including the Southwest and Texas, will experience above-average temperatures from August 5-9, leading to increased demand for natural gas.

The initial drop in natural gas prices on Thursday was attributed to a 3.25-month low following a weekly report from the EIA, which showed nat-gas inventories rose by +48 bcf in the week ended July 25. This inventory increase was higher than the expected +41 bcf and above the five-year average for this time of year at +24 bcf. Additionally, higher US natural gas production has been weighing on prices. According to Baker Hughes, the number of active US natural gas drilling rigs rose by +5 to a nearly 2-year high of 122 rigs in the week ending July 25.

Lower-48 state dry gas production on Thursday was 107.8 bcf/day (+2.4% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 80.5 bcf/day (-7.0% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Thursday were 14.9 bcf/day (-2.4% w/w), according to BNEF. An increase in US electricity output is also positive for natural gas demand from utility providers. The Edison Electric Institute reported that total US (lower-48) electricity output in the week ended July 26 rose +8.1% y/y to 98,772 GWh, and US electricity output in the 52-week period ending July 26 rose +2.7% y/y to 4,258,448 GWh.

The rebound in natural gas prices is a reflection of the balance between supply and demand. While higher US natural gas production and inventories have put downward pressure on prices, the anticipated increase in demand due to hotter weather forecasts has led to a recovery. The technical support at key levels and the positioning of futures contracts have also contributed to the price rebound.

Looking ahead, the long-term outlook for natural gas prices hinges on various factors, including LNG export growth, electricity generation, and the number of active drilling rigs. As the summer heatwave approaches, natural gas demand is expected to surge, which could offset the bearish inventory overhang and support prices.

References:
[1] https://www.barchart.com/story/news/33789874/nat-gas-prices-recover-on-forecasts-for-hotter-us-weather
[2] https://www.tradingnews.com/news/natural-gas-renounds-from-three-month-low
[3] https://www.ainvest.com/news/crude-calculus-navigating-energy-sector-opportunities-inventory-dynamics-2507/