Cooler temperatures this week and a dip in available wind power this month are boosting the demand outlook for June for U.S. natural gas, leading to nearly 3% price gains on Wednesday.
At 9:45 a.m. EST on Wednesday, U.S. natural gas futures were trading up 2.93% at $2,389 per million British thermal units (Btu).
While the weather is a big driver of prices on Wednesday, natural gas is also gaining on a downturn in renewable energy from wind farms, which has increased usage of natural gas over the past few weeks.
Counterbalancing a further uptick in natural gas prices is record production in the U.S., combined with a resumption of a similar level of Canadian gas exports to the U.S., which had declined due to wildfires raging in Alberta that led to some production shut-in.
According to Reuters, citing federal energy data, wind power generation this week accounted for only 7% of total U.S. power generation, down from 17% in mid-April.
On Tuesday, natural gas futures had hit a one-week low, largely due to an anticipated increase in U.S. output combined with the return of full volumes of Canadian exports on the U.S. market.
Last week, Baker Hughes released a report indicating that oversupply conditions and a collapse in prices have led the U.S. natural gas sector to start pulling drilling rigs at the fastest pace since February 2016. Last Friday, Baker Hughes reported that E&P companies had reduced rigs by 16 to a total of 141.
In April, a key provider of rigs to the American shale patch warned that rig leases were on track to drop by 9% by the end of June as drillers press pause due to prices that have plunged from over $10 per million Btu in August last year.
By Charles Kennedy for Oilprice.com
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