Nat-Gas Prices Fall on Above-Normal US Weather Forecasts

February Nymex natural gas (NGG26) on Friday closed down -0.068 (-1.84%),

Feb nat-gas prices extended this week's sell-off on Friday to a 2.25-month nearest-futures low.  Nat-gas prices retreated as warmer-than-normal US weather forecasts for mid-January could reduce nat-gas heating demand and boost storage levels.  Forecaster Atmospheric G2 said Friday that much warmer-than-normal temperatures are forecast over the eastern two-thirds of the US for January 7-11.  Also, temperatures shifted warmer across the north-central US region for January 12-16.  

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 Friday was 110.0 bcf/day (+4.4% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 101.0 bcf/day (+0.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 19.6 bcf/day (+1.9% 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.

Wednesday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended December 26 fell by -38 bcf, a smaller draw than the market consensus of -51 bcf and much smaller than the 5-year weekly average draw of -120 bcf.  As of December 26, nat-gas inventories were down -1.1% y/y and were +1.7% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of December 31, gas storage in Europe was 62% full, compared to the 5-year seasonal average of 74% 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.