Nat-Gas Prices Surge on Cold US Weather Outlook

January Nymex natural gas (NGF25) on Thursday closed sharply higher by +0.210 (+6.22%)

Jan nat-gas prices rallied sharply Thursday and posted a 3-1/2 week high.  The prospects of colder US temperatures that will boost heating demand for nat-gas sent prices soaring on Thursday.   NatGasWeather said that updated weather models show colder temperatures advancing into the northern half of the US January 1-3.  Also, EBW AnalyticsGroup said that the longer-range weather outlook has increased for a mid-January cold spell in the southern US that could lead to freeze-offs and nat-gas production disruptions.

Lower-48 state dry gas production Thursday was 104 bcf/day (-2.5% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 101.1 bcf/day (-2.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 13.7 bcf/day (+6.1% 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 Wednesday that total US (lower-48) electricity output in the week ended December 14 rose +2.97% y/y to 80,641 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 14 rose +2.02% y/y to 4,175,618 GWh.

Thursday's weekly EIA report was slightly bullish for nat-gas prices since nat-gas inventories for the week ended December 13 fell -125 bcf, right on expectations but a much larger draw than the 5-year average draw for this time of year of -92 bcf.  As of December 13, nat-gas inventories were up +1.3% y/y and were +3.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 77% full as of December 17, 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).