Nat-Gas Prices Climb on the Outlook for Colder US Weather

February Nymex natural gas (NGG25) on Friday closed up +0.064 (+1.93%).

Feb nat-gas prices Friday posted moderate gains on the outlook for colder US weather to boost heating demand for nat-gas.  Forecaster Maxar Technologies said Friday that below-normal temperatures will move into the central and eastern US Jan 1-5 and intensify in the following 5 days.   Nat-gas prices fell back from their best levels Friday after weekly EIA nat-gas inventories fell -93 bcf last week, a smaller draw than expectations of -100 bcf.  

Lower-48 state dry gas production Friday was 106.4 bcf/day (+1.2% y/y), according to BNEF.  Lower-48 state gas demand Friday was 93 bcf/day (+6.8% y/y), according to BNEF.  LNG net flows to US LNG export terminals Friday were 14.4 bcf/day (-1.4% 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 Thursday that total US (lower-48) electricity output in the week ended December 21 rose +1.87% y/y to 79,947 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 21 rose +2.32% y/y to 4,177,082 GWh.

Friday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended December 20 fell -93 bcf, a smaller draw than expectations of -100 and a much smaller draw than the 5-year average draw for this time of year of -127 bcf.  As of December 20, nat-gas inventories were up +1.1% y/y and were +4.9% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 76% full as of December 22, below the 5-year seasonal average of 79% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending December 27 were unchanged at 102 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).