Nat-Gas Prices Plunge on Ample Supplies and Warm US Temps

February Nymex natural gas (NGG26) on Wednesday closed down -0.286 (-7.20%),

Feb nat-gas sold off sharply to a 2-month nearest-futures low on Wednesday after weekly storage levels fell less than expected.  The EIA reported Wednesday that nat-gas inventories fell -38 bcf for the week ended December 26, a smaller draw than expectations of -51 bcf.  

Losses in nat-gas prices accelerated Wednesday on forecasts of above-normal temperatures that will reduce nat-gas heating demand.  Forecaster Atmospheric G2 said Wednesday that forecasts shifted significantly warmer over the eastern two-thirds of the US for January 5-9.  Also, temperatures trended warmer over the eastern US for January 10-14.  

Higher US nat-gas production is bearish for prices.  The EIA on December 9 raised its forecast for 2025 US nat-gas production to 107.74 bcf/day from its November estimate of 107.70 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

US (lower-48) dry gas production on Wednesday was 113.8 bcf/day (+7.6% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 106.1 bcf/day (+24.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 19.9 bcf/day (+7.1% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported on December 10 that US (lower-48) electricity output in the week ended December 6 rose +2.3% y/y to 85,330 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 6 rose +2.84% y/y to 4,291,665 GWh.

Wednesday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended December 26 fell by -38 bcf, a smaller draw than the market consensus of -51 bcf and much smaller than the 5-year weekly average draw of -120 bcf.  As of December 26, nat-gas inventories were down -1.1% y/y and were +1.7% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of December 28, gas storage in Europe was 64% full, compared to the 5-year seasonal average of 75% full for this time of year.

Baker Hughes reported Tuesday that the number of active US nat-gas drilling rigs in the week ending January 2 fell by -2 to 125 rigs, modestly below the 2.25-year high of 130 set on 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.