Nat-Gas Prices Gain on a Larger-Than-Expected Draw in EIA Inventories

March Nymex natural gas (NGH25) on Thursday closed up by +0.063 (+1.77%).

Mar nat-gas prices Thursday extended this week's rally to a 2-week high on a larger-than-expected draw in weekly nat-gas supplies.  The EIA reported Thursday that nat-gas inventories fell -100 bcf in the week ended February 7, a larger draw than expectations of -91 bcf.

Forecasts for colder US weather boosting heating demand for nat-gas also underpin gas prices.  Forecaster Maxer Technologies said forecasts have trended colder for the eastern half of the country for February 17-21.  

Lower-48 state dry gas production Thursday was 105.4 bcf/day (-0.4% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 119.5 bcf/day (+20.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 15.4 bcf/day (+4.1% 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 February 8 rose +4.8% y/y to 79,239 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 8 rose +2.6% y/y to 4,206,808 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended February 7 fell -100 bcf, a larger draw than expectations of -91 bcf,  although a smaller draw than the 5-year average draw for this time of year of -144 bcf.  As of February 7, nat-gas inventories were down -9.2% y/y and -2.8% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 47% full as of February 11, below the 5-year seasonal average of 5% 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).