Nat-Gas Prices Rally on Frigid US Temps and Tighter Supplies

February Nymex natural gas (NGG25) on Thursday closed up by +0.175 (+4.29%).

Feb nat-gas prices Thursday settled sharply higher and are modestly below Monday's 1-year nearest-futures high.   The outlook for colder US weather that will boost heating demand for nat-gas is pushing prices higher.  Forecaster Maxar Technologies said Thursday that weather models shifted colder for the northern and western part of the US for Jan 21-25, with near-record low temperatures for the eastern half of the US.  

Nat-gas prices also found support Thursday on a large draw in weekly supplies after the EIA reported that nat gas inventories for the week ended January 10 fell -258 bcf, close to expectations of -260 bcf and a much larger draw than the five-year average for this time of year of -128 bcf.  

Lower-48 state dry gas production Thursday was 103.7 bcf/day (+14.6% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 109.7 bcf/day (-19.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 15.5 bcf/day (+6.2% 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 January 11 rose +10.61% y/y to 91,182 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 11 rose +2.46% y/y to 4,188,244 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended January 10 fell -258 bcf, close to expectations of -260 but a much bigger draw than the 5-year average draw for this time of year of -128 bcf.  As of January 10, nat-gas inventories were up +2.1% y/y and were +2.5% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 65% full as of January 13, below the 5-year seasonal average of 71% 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 January 10 fell -3 to 100 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).