U.S. natural gas stockpiles gained 110 billion cubic feet for the week ended May 26, putting more downward pressure on prices, particularly as storage is now 557 billion cubic feet higher than at this time last year, and well above the five-year average. The increase in natural gas stockpiles was largely in line with analyst expectations, though slightly lower than the consensus estimate of 113 Bcf. Steady production and only modest demand continue to set natural gas prices up for further decline in the coming quarter, which will affect Q2 earnings of gas-weighted exploration and production companies. On Thursday, shortly after the EIA’s storage report release, natural gas prices were trading down 5.25% at $2.140.
According to data from RBN Energy, Henry Hub gas prices are positioned to be 9% lower than in the first-quarter, while Appalachia natural gas trading hubs are looking even more dismal. Dry natural gas production in the U.S. hit 3,171 billion cubic feet in March, while total gas output rose to 9,180 Bcf–both figures 7% higher year-on-year, according to the EIA. Consumption was also up, however. The EIA showed natural gas consumption in March at 3,006 Bcf, which represents an increase of just over 8% from year-ago figures.
Prices in Europe have also nose-dived on weak demand, while European inventories remain higher than normal and renewable energy output has increased. On Wednesday, European natural gas futures at the TTF hub were trading at a two-year low of around $26.70 per megawatt-hour (MWh), while prices have shed some 65% since the beginning of this year and 90% since August 2022.
On June 1, Dutch TTF Natural Gas Futures (July 2023 contract) were trading down nearly 14% on the day.
By Tom Kool for Oilprice.com
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