Nat-Gas Prices Soar as Frigid US Temps to Persist

January Nymex natural gas (NGF26) on Friday closed up sharply by +0.226 (+4.46%).

Jan nat-gas prices soared on Friday to a nearly 3-year nearest-futures high as forecasts of frigid US temperatures are expected to boost nat-gas heating demand.  Nat-gas prices have rallied sharply over the past week as late-autumn temperatures have remained well below normal and are expected to persist, boosting heating demand and shrinking nat-gas storage levels.  Forecaster Atmospheric G2 said Friday that significantly colder-than-normal temperatures are forecast over the eastern half of the US for December 10-14, with the pattern continuing into the following week.    

US (lower-48) dry gas production on Friday was 111.7 bcf/day (+7.2% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 113.3 bcf/day (-1.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 18.3 bcf/day (-1.2% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported on Wednesday that US (lower-48) electricity output in the week ended November 29 rose +2.11% y/y to 76,459 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 29 rose +2.99% y/y to 4,289,746 GWh.

Higher US nat-gas production is a bearish factor for prices.  On November 12, the EIA raised its forecast for 2025 US nat-gas production by +1.0% to 107.67 bcf/day from September's estimate of 106.60 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended November 28 fell by -12 bcf, a smaller draw than the market consensus of -18 bcf and than the 5-year weekly average of a -43 bcf draw.  As of November 28, nat-gas inventories were down -0.4% y/y and were +5.1% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of December 3, gas storage in Europe was 74% full, compared to the 5-year seasonal average of 84% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending December 5 fell by -1 to 129, just below the 2.25-year high of 130 rigs from November 28.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.