Cold US Weather Forecasts Push Nat-Gas Prices Higher

January Nymex natural gas (NGF25) on Wednesday closed higher by +0.066 (+2.00%)

Jan nat-gas prices on Wednesday added to Tuesday's gains and settled moderately higher.   Nat-gas price rose Wednesday as longer-range weather forecasts showed colder temperatures advancing into the Midwest and Central US in early January, which will boost heating demand for nat-gas.  On Wednesday, NatGasWeather said that updated weather models show colder temperatures advancing into the northern half of the US January 1-3.

Expectations for a larger-than-seasonal draw in weekly nat-gas supplies also boosted prices on Wednesday.  The consensus is for Thursday's EIA nat-gas inventories to fall -124 bcf for the week ended December 13, a larger draw than the five-year average for this time of year of -92 bcf.

Lower-48 state dry gas production Wednesday was 104.5 bcf/day (-1.3% y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 95.4 bcf/day (-0.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Wednesday were 14.3 bcf/day (+7.8% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended December 7 rose +10.87% y/y to 83,412 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 7 rose +1.96% y/y to 4,173,295 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended December 6 fell -190 bcf versus expectations of -168 bcf and a much larger draw than the 5-year average draw for this time of year of -71 bcf.  As of December 6, nat-gas inventories were up +2.3% y/y and were +4.6% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 77% full as of December 16, below the 5-year seasonal average of 80% 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 13 rose +1 rig to 103 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).