Natural gas prices are holding near $3.244 after a sharp decline yesterday to $3.187 from the recent high of $3.369 registered on June 15. An increasing air cooling demand in the US due to warmer weather forecast is likely to increase domestic gas consumption by electricity providers.
Weather forecasting agency Maxar on Wednesday said that above-normal temperatures are expected in the West, and below-normal temperatures are expected in the Midwest from June 21-25. Maxar expects record heat on in the US West through June 20.
As per Bloomberg data, US domestic natural gas demand Wednesday was 63.4 bcf, up +6.1% y/y. Also, increasing export demand is providing additional support to the prices. As per Bloomberg data gas flows to US LNG export terminals on Wednesday were 9.9 bcf, up +10% w/w.
US electricity output in the week ended June 12 rose +8.6% y/y to 87,138 GWh, it is likely to increase in the coming week due to warmer weather forecast, which is supportive for natural gas prices.
Bloomberg data showed US gas production on Wednesday was up +2.5% y/y at 89.981 bcf/d.
Natural gas prices are likely to get fresh direction from the weekly inventory report later today. The consensus is for an increase of +70 bcf in weekly gas inventory. Inventories in the week ended Jun 4 rose +98 bcf to 2,411 bcf, right on expectations but above the 5-year average for this time of year at +92 bcf.
However gas inventories still down -14.1% y/y and -2.2% below their 5-year average.
According to the CFTC Commitments of Traders report for the week ended June 8, net short for natural gas futures increased by 15077 contracts to 102508 for the week. Speculative long position increased by 23130 contracts, while shorts added by 38207 contracts.
Baker Hughes reported last Friday that the number of active US natural gas drilling rigs in the week ended June 11 fell by -1 rig to 96 rigs, which is still well above the record low of 68 rigs posted in July 2020.
Natural gas July month expiry contract is likely to trade firm while above the key support level of 20 days EMA of $3.135 and 50 days EMA of $3.001 while it may find stiff resistance around $3.324-$3.470