February Nymex natural gas (NGG25) on Wednesday closed up sharply by +0.204 (+5.43%).
Feb nat-gas prices Wednesday recovered from a 1-1/2 week low and rallied sharply as updated weather forecasts turned much colder for the beginning of next month, which will boost heating demand for nat-gas. Forecaster Atmospheric G2 said Wednesday that forecasts moved significantly colder in the central and western parts of the US for February 1-5.
Nat-gas prices are also supported on expectations of tighter supplies as the current US cold snap boosts nat-gas usage and draws down supplies. The consensus is that Thursday's weekly EIA report will show nat-gas inventories fell by -247 bcf for the week ended January 17, a much larger draw than the five-year average for this time of year of -167 bcf.
Last Monday, nat-gas prices soared to a 1-year nearest-futures high as an arctic blast sent temperatures plunging across the US, leading to a surge in heating demand and reducing inventories. The EIA reported last Thursday that nat gas inventories for the week ended January 10 fell -258 bcf, a much larger draw than the five-year average for this time of year of -128 bcf.
Lower-48 state dry gas production Wednesday was 100.8 bcf/day (-0.6% y/y), according to BNEF. Lower-48 state gas demand Wednesday was 130.2 bcf/day (+15.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 11.8 bcf/day (-21% 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 last Wednesday that total US (lower-48) electricity output in the week ended January 11 rose +10.61% y/y to 91,182 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 11 rose +2.46% y/y to 4,188,244 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended January 10 fell -258 bcf, close to expectations of -260 but a much bigger draw than the 5-year average draw for this time of year of -128 bcf. As of January 10, nat-gas inventories were up +2.1% y/y and were +2.5% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 59% full as of January 20, below the 5-year seasonal average of 67% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending January 17 fell -2 to 98 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs. Active rigs have fallen since posting a 5-1/4 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. More news from BarchartThe views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
