February Nymex natural gas (NGG24) on Wednesday closed +0.191 (+7.80%).
Nat-gas prices Wednesday rallied sharply on expectations for a large draw in weekly EIA nat-gas inventories Thursday, which sparked short-covering in nat-gas futures. Â Thursday's EIA nat-gas inventories are expected to fall -322 bcf, the third-largest recorded draw ever, as near-record cold last week in the U.S. boosted heating demand for nat-gas.
On Monday, nat-gas tumbled to a 1-month low on the outlook for warmer temperatures for most of the U.S. for the start of February, which will curb curbing heating demand for nat-gas. Â The Commodity Weather Group said Wednesday that the forecast remains warm across the Plains and the Midwest from Jan 29-Feb 7.
Lower-48 state dry gas production Wednesday was 102.6 bcf/day (+3.3% y/y), according to BNEF. Â Lower-48 state gas demand Wednesday was 92.7 bcf/day (-7.5% y/y), according to BNEF. Â LNG net flows to U.S. LNG export terminals Wednesday were 14.0 bcf/day (+35.8% w/w), according to BNEF.
The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices. Â AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
A sharp increase in U.S. electricity output is positive for nat-gas demand from utility providers. Â The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended January 20 jumped +22.6% y/y to 94,267 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 20 fell -0.4% y/y to 4,105,100 GWh.
The consensus is for Thursday's weekly EIA nat-gas inventories to fall -322 bcf, a much larger draw than the 5-year average for this time of year of -148 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended January 12 fell -154 bcf, a smaller draw than expectations of -165 bcf, although above the 5-year average draw of -126 bcf. Â As of January 12, nat-gas inventories were up +12.8% y/y and were +11.2% above their 5-year seasonal average, signaling ample nat-gas supplies. Â In Europe, gas storage was 74% full as of January 22, above the 5-year seasonal average of 63% full for this time of year.
Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ending January 19 rose +3 rigs to 120 rigs, just above the 2-year low of 113 rigs posted September 8. Â Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
More Natural Gas News from Barchart
- Nat-Gas Prices Finish Higher on Technical Buying
- Nat-Gas Prices Sink as Forecasts for U.S. Temperatures Shift Warmer
- Nat-Gas Prices Plummet on Forecasts for Above-Average U.S. Temps
- Nat-Gas Prices Tumble as Weekly EIA Inventories Fall Less Than Expected
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.
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