Natural gas July month expiry contract is holding near $3.014 with minor losses from the previous day, however above average US temperature expectation from June 5 to 9 is providing support to the prices. Natural gas is used to produce centricity and its consumption increases once cooling demand increase in the US which supports gas prices.
The Weather Company expects below-average cooling demand from May 31-June 4, but warmer-than-normal conditions from June 5-9.
Natural gas prices are also finding support from strong domestic demand in the US, domestic demand increased on Wednesday by 0.4% y/y to 60.4 bcf
Stronger domestic natural gas demand and export demand is bullish for prices as nat-gas demand in the lower 48 US states on Wednesday rose +0.4% y/y to 60.4 bcf. Also gas flows to U.S LNG export terminals on Wednesday rose +55% y/y to 10.0 bcf(according to Bloomberg data).
Additionally, electricity output continues to grow in the US, as per the report from Edison Electric Institute, the total US electricity output in the week ended May 22 rose +5.4% y/y to 72,050 GWh (gigawatt hours),
However, gas production number in the US is likely to keep prices under pressure. As per the Bloomberg report, US gas production on Wednesday was up +3.3% y/y at 90.972 bcf/d.
Natural gas is likely to get fresh direction from weekly EIA inventory data later today. The consensus is for weekly EIA gas inventories to climb 105 bcf for the week ended May 21. As per the last report, US nat-gas inventories in the week ended May 14 rose +71 bcf to 2,100 bcf, however, it is still down by 16.1% y/y and below 4% of their 5-year average.
The gas rig count is an early indication of production. Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended May 21 fell by -1 rig to 99 rigs, well above the record low of 68 rigs posted in July 2020.
Natural gas prices are likely to remain firm while above the key support level of 20 days EMA at $2.92 and 50 days EMA at $2.84. Meanwhile, it is likely to face stiff resistance around $3.08 and $3.24.