Nat-Gas Prices Edge Higher on Cold US Temps

February Nymex natural gas (NGG25) on Thursday closed up by +0.027 (+0.74%).

Feb nat-gas prices Thursday recovered from early losses and settled moderately higher as forecasts for the first half of this month continue to call for below-normal temperatures across most of the US, boosting heating demand for nat-gas.  Forecaster Maxar Technologies said Thursday that the latest January 12-16 forecast has shifted notably colder across the US compared with the previous outlook.  Thursday's surge in European nat-gas prices to a 14-month high also provided carryover support to US nat-gas prices.

Lower-48 state dry gas production Thursday was 104.9 bcf/day (-0.5% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 100.9 bcf/day (-3.8% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 14.6 bcf/day (+1.9% 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 Thursday that total US (lower-48) electricity output in the week ended December 28 rose +6.25% y/y to 77,960 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 28 rose +2.59% y/y to 4,181,671 GWh.

The consensus is that Friday's weekly EIA nat-gas inventories for the week ended December 27 fell by -128 bcf, a larger draw than the 5-year average of -104 bcf for this time of year.

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 74% full as of December 28, below the 5-year seasonal average of 78% 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).