Nat-Gas Prices Extend Sharp Rally on Cold Temps

March Nymex natural gas (NGH25) on Wednesday soared by another +0.273 (+6.81%), adding to Tuesday's +7.57% gain and posting the seventh consecutive daily rise.

March nat-gas has rallied very sharply this week as a cold snap and storms moved through the United States.  In addition, Atmospheric G2 forecasted colder weather for March 1-5, with very cold temps in the northern part of the US.

Nat-gas prices also found support ahead of this week's EIA report due to consensus expectations for a draw of -193 bcf, which would be a much bigger draw than the average draw for the week.

In a bullish longer-term factor for nat-gas prices, President Trump in January lifted the Biden administration's pause on approving gas export projects, thus moving into active consideration a backlog of about a dozen LNG export projects.  Bloomberg reported that the Trump administration is close to approving its first LNG export project, a Commonwealth LNG export facility in Louisiana.  Increased US capacity for exporting LNG would boost demand for US nat-gas and would be supportive of nat-gas prices.

Lower-48 state dry gas production Wednesday was 101.9 bcf/day (-3.5% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 129.1 bcf/day (+30.1% y/y), according to BNEF.  LNG net flows to US LNG export terminals Tuesday were 15.7 bcf/day (+4.2% 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 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.

Last 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, versus 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 14 rose +1 to 101 rigs, modestly above the 3-1/2 year low of 94 rigs posted on September 6, 2024.  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).