Nat-Gas Prices Give Up Early Gains as US Weather Forecasts Warm

February Nymex natural gas (NGG26) on Tuesday closed down -0.014 (-0.35%),

Feb nat-gas on Tuesday gave up an early advance and settled lower after forecasts for warmer US weather signaled reduced heating demand for nat-gas and sparked long liquidation in nat-gas futures.  Forecaster Atmospheric G2 said Tuesday that forecasts shifted warmer over much of the central and eastern US for January 4-8.  Also, temperatures trended warmer over the eastern US for January 9-13.  

Higher US nat-gas production is bearish for prices.  The EIA on December 9 raised its forecast for 2025 US nat-gas production to 107.74 bcf/day from its November estimate of 107.70 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

US (lower-48) dry gas production on Tuesday was 112.9 bcf/day (+6.0% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 113.1 bcf/day (+41.4% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 19.8 bcf/day (+8.6% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported on December 10 that US (lower-48) electricity output in the week ended December 6 rose +2.3% y/y to 85,330 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 6 rose +2.84% y/y to 4,291,665 GWh.

Monday's weekly EIA report, delayed from last Thursday, was slightly supportive for nat-gas prices, as nat-gas inventories for the week ended December 19 fell by -166 bcf, a smaller draw than the market consensus of -169 bcf but larger than the 5-year weekly average draw of -110 bcf.  As of December 19, nat-gas inventories were down -3.3% y/y and were -0.7% below their 5-year seasonal average, signaling tight nat-gas supplies.  As of December 28, gas storage in Europe was 64% full, compared to the 5-year seasonal average of 75% full for this time of year.

Baker Hughes reported Tuesday that the number of active US nat-gas drilling rigs in the week ending January 2 fell by -2 to 125 rigs, modestly below the 2.25-year high of 130 set on 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.