Nat-Gas Prices Surge on Cold Temps and Record U.S. LNG Exports

April Nymex natural gas (NGJ23) on Friday closed up +0.244 (+8.82%).

Apr nat-gas Friday rallied to a 5-week high and closed sharply higher.  The outlook for colder U.S. temperatures that will boost heating demand for nat-gas sparked fund buying of nat-gas futures Friday.  The Commodity Weather Group said temperatures are expected to fall below normal across most of the U.S. at least through the middle of March.  Also, record U.S. nat-gas exports will reduce stockpiling of  U.S. gas supplies and is bullish for prices.  The BNEF reported Friday that gas flows to U.S. LNG export terminals rose to a record 14.1 bcf, up +14% w/w.

Lower-48 state dry gas production on Friday was 98.6 bcf (+4.3% y/y), moderately below the record high of 103.6 bcf posted on Oct 3, according to BNEF.  Lower-48 state gas demand Friday was 86.4 bcf/day, up +4.1% y/y, according to BNEF.  On Friday, LNG net flows to U.S. LNG export terminals were a record 14.1 bcf/day, up +14% w/w.

Nat-gas prices have fallen sharply over the past three months and posted a 2-1/4 year nearest-futures low last Wednesday as normally mild weather across the northern hemisphere erodes heating demand for nat-gas.  January was the sixth-warmest across the contiguous 48 U.S. states in data from 1895.  This winter's warm temperatures have caused rising nat-gas inventories in Europe and the U.S.  Gas storage across Europe was currently 61% full as of Feb 28, far above the 5-year seasonal average of 40%.  Also, U.S. nat-gas inventories were +19.3% above their 5-year average as of Feb 24, the most in 2-3/4 years.

A decline in U.S. electricity output is bearish for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended Feb 25 fell -6.0% y/y to 74,362 GWh (gigawatt hours).  However, cumulative U.S. electricity output in the 52-week period ending Feb 25 rose +1.3% y/y to 4,103,105 GWh.

Thursday's weekly EIA report was mixed for nat-gas prices since it showed U.S. nat gas inventories fell -81 bcf, more than expectations of -75, but a much smaller draw than the 5-year average draw of -134 bcf for this time of year.  Nat-gas inventories are now +19.3% above their 5-year seasonal average, the most in 2-3/4  years.

Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ended Mar 3 rose +3 to 154 rigs, moderately below the 3-1/4 year high of 166 rigs posted in the week ended Sep 9.  Active rigs have more than doubled from the record low of 68 rigs posted in July 2020 (data since 1987).

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