Forecasts for Colder US Temps Lift Nat-gas Prices

March Nymex natural gas (NGH25) on Monday closed up by +0.135 (+4.08%).

Mar nat-gas prices Monday rallied to a 2-week high and settled sharply higher.  Nat-gas prices rallied on expectations for colder US weather that would boost heating demand for nat-gas.  Forecaster Atmospheric G2 said Monday that forecasts have shifted colder, especially in the Central and Eastern parts of the US, for February 15-19.   Strength in European nat-gas prices also supported US gas prices after European nat-gas Monday surged to a 2-year high.

Tightness in US nat-gas supplies is supportive of prices.  Last Thursday's weekly EIA inventory report showed that US nat-gas inventories as of January 31 were -4.4% below the five-year average, the lowest level in over 2 years.  

Lower-48 state dry gas production Monday was 107.2 bcf/day (+1.4% y/y), according to BNEF.  Lower-48 state gas demand Monday was 107.4 bcf/day (+29.8% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 15 bcf/day (+3.3% 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 Wednesday that total US (lower-48) electricity output in the week ended February 1 rose +6.2% y/y to 81,767 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 1 rose +2.5% y/y to 4,203,156 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended January 31 fell -174 bcf, a larger draw than expectations of -171 bcf and right on the 5-year average draw for this time of year.  As of January 31, nat-gas inventories were down -7.2% y/y and -4.4% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 51% full as of February 4, below the 5-year seasonal average of 59% 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 February 7 rose +2 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).