Can weather-driven demand maintain rebound?
Forecasting is dampening immediate excitement. Natgasweather predicts that much of the Midwest and East will experience below-average temperatures until May 27th, resulting in generally lighter national demand. Daytime highs are expected to hover in the 50s and 70s, with some areas even cooler. In contrast, hot and dry weather is anticipated in the western and southern U.S. until early June. If this trend continues, it might enhance national demand.
The potential for significant heat-driven demand is still uncertain, but the market reacted positively to forecasts indicating strong conditions between June 2 and 4. There’s a bullish argument to be made based on increased power consumption from air conditioning, though that timeline is still distant and may change.
What role do cash prices and export flows play?
Support from the physical market assisted in boosting profits on Tuesday. WAHA’s cash prices are in positive territory, signaling improvement in the region’s fundamentals. Export flows are also a key support, reflecting record levels of U.S. shipments to Mexico and steady cross-border demand. However, LNG exports saw a slight drop this week to 15.0 bcf/day, which tempered some of the bullish sentiment.
Dried gas production continues to rise, currently at 106.1 bcf/day, marking a 5.1% increase from last year. On the flip side, demand is falling short. Daily consumption is down to 67.5 bcf/day, a 2% decrease compared to last year. These figures highlight an overall supply-heavy situation, despite any short-term bullish trends that may be forming.
Are you careful about signaling inventory and electricity demand?
The EIA Storage Report from last Thursday reported 110 BCF injections, aligning with expectations but significantly exceeding the five-year average of 83 BCF. Although this is 14.6% lower than last year, storage levels are 2.6% above the five-year average. Additionally, power output for the week ending May 10th saw a 2.8% year-on-year decline.
In Europe, gas storage was at 45% as of May 18, beneath the five-year average of 55%, which slightly supports global gas prices that may have an impact on U.S. benchmarks.
