Hopes of US-China Trade Talks Spurs Risk-On Sentiment and Boosts Nat-Gas Prices

June Nymex natural gas (NGM25) on Friday closed up sharply by +0.151 (+4.34%).June nat-gas prices on Friday rallied sharply for a second session and posted a 2-1/2 week high. Nat-gas prices found support Friday on news that China is evaluating possible trade talks with the US, which sparked risk-on sentiment in asset markets. Last Thursday, nat-has prices tumbled to a 5-month nearest-futures low as the warm US spring weather has dampened heating demand for nat-gas and allowed supplies to rebuild. NatGasWeather said Wednesday that near-normal weather across the US through May 14 will keep demand for nat-gas light, allowing inventories to climb even more. In March, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season. BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.Lower-48 state dry gas production Friday was 105.5 bcf/day (+5.2% y/y), according to BNEF. Lower-48 state gas demand Friday was 63.2 bcf/day (-9.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Friday were 15.1 bcf/day (-0.7% w/w), according to BNEF.An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Wednesday that total US (lower-48) electricity output in the week ended April 26 rose +5.2% y/y to 73,210 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 26 rose +3.8% y/y to 4,252,848 GWh.In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.Thursday's weekly EIA report was mixed for nat-gas prices since nat-gas inventories for the week ended April 25 rose +107 bcf, below expectations of +109 bcf but well above the 5-year average build for this time of year of +58 bcf. As of April 25, nat-gas inventories were down -17.8% y/y and +0.2% above their 5-year seasonal average, signaling adequate nat-gas supplies. In Europe, gas storage was 39% full as of April 29, versus the 5-year seasonal average of 49% full for this time of year.Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending May 2 rose +2 to 101 rigs, modestly above the 4-year low of 94 rigs posted on September 6, 2024. Active rigs have fallen since posting a 5-1/2 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987). On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.