Nat-Gas Prices Slip as Weekly EIA Inventories Shrink Less Than Expected

April Nymex natural gas (NGJ25) on Thursday closed down -0.025 (-0.63%).

April nat-gas on Thursday settled moderately lower after weekly nat-gas inventories fell less than expected.  The EIA reported Thursday that nat-gas inventories fell -261 bcf last week, a smaller draw than expectations of -271 bcf.  Also, forecasts for warmer US temperatures to reduce heating demand for nat-gas weighed on prices.  The Commodity Weather Group said Thursday that above-normal weather is expected across the southern half of the US for the March 4-8 period.  

Nat-gas prices have been whipsawed in the past several sessions by weather factors and have consolidated below last Thursday's 2-year high.  However, nat-gas prices remain near the top of the February rally, which was driven mainly by the inventory drawdown caused by the recent cold weather.  As of February 21, EIA nat-gas inventories were -11.5% below their 5-year average; the tightest supplies have been in over 2-1/2 years.  

Lower-48 state dry gas production Thursday was 107.4 bcf/day (+2.8 y/y), according to BNEF.  Lower-48 state gas demand Thursday was 83.5 bcf/day (+11% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 15.4 bcf/day (+0.6% 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 22 rose +19.9% y/y to 90,673 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 22 rose +3.1% y/y to 4,230,167 GWh.

In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, 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 support nat-gas prices.

Thursday's weekly EIA report was slightly bearish for nat-gas prices since nat-gas inventories for the week ended February 21 fell -261 bcf, a smaller draw than expectations of -271 bcf but a larger draw than the 5-year average draw for this time of year of -141 bcf.  As of February 21, nat-gas inventories were down -22.5% y/y and -11.5% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 40% full as of February 25, versus the 5-year seasonal average of 51% 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 21 fell -2 to 99 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).