Nat-Gas Prices Plunge as US Weather Forecasts Warm

January Nymex natural gas (NGF26) on Monday closed down sharply by -0.377 (-7.13%).

Jan nat-gas prices plunged on Monday after updated weather forecasts showed US temperatures warming mid-month, potentially curbing nat-gas heating demand.  Forecaster Atmospheric G2 said that the forecast shifted slightly colder over he eastern and southern US for December 18-22, but noticeably warmer elsewhere.  Also, other weather models support a broad-scale warmer risk as cold air is confined to Canada.

Last Friday, nat-ga prices rallied to a nearly 3-year nearest-futures high as late-autumn temperatures have remained well below normal and are expected to persist in the near term, boosting heating demand and shrinking nat-gas storage levels.  

US (lower-48) dry gas production on Monday was 113.1 bcf/day (+8.3% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 114.7 bcf/day (+30.1% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 18.0 bcf/day (+1.0% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended November 29 rose +2.11% y/y to 76,459 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 29 rose +2.99% y/y to 4,289,746 GWh.

Higher US nat-gas production is a bearish factor for prices.  On November 12, the EIA raised its forecast for 2025 US nat-gas production by +1.0% to 107.67 bcf/day from September's estimate of 106.60 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended November 28 fell by -12 bcf, a smaller draw than the market consensus of -18 bcf and than the 5-year weekly average of a -43 bcf draw.  As of November 28, nat-gas inventories were down -0.4% y/y and were +5.1% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of December 3, gas storage in Europe was 74% full, compared to the 5-year seasonal average of 84% 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 December 5 fell by -1 to 129, just below the 2.25-year high of 130 rigs from November 28.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.
 

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.