Nat-Gas Prices Surge on Forecasts for Frigid US Temps

February Nymex natural gas (NGG25) on Monday closed up sharply by +0.553 (+16.35%).

Feb nat-gas prices on Monday surged to a nearly 1-year nearest-futures high on a colder outlook for next month, which will boost heating demand for nat-gas.  Fund buying sent prices soaring Monday when the National Weather Service forecast colder-than-normal weather across the US East and Midwest in its 8-14 day outlook, an abrupt shift from what's until now been a mostly mild early winter in the US.  

Lower-48 state dry gas production Monday was 106.5 bcf/day (+1.2% y/y), according to BNEF.  Lower-48 state gas demand Monday was 85.1 bcf/day (-9.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 14.3 bcf/day (+2.9% 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 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.

Last 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 last Friday that the number of active US nat-gas drilling rigs in the week ending December 27 was 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).