Nat-Gas Prices Surge as US Weather Forecasts Turn Colder

February Nymex natural gas (NGG26) on Wednesday closed up +0.175 (+5.22%),

Feb nat-gas prices surged on Wednesday and settled sharply higher as longer-term US weather forecasts turned colder, potentially boosting heating demand and sparking short covering in nat-gas futures.   The Commodity Weather Group said Wednesday that a colder weather forecast is predicted for the Midwest and East Coast for January 17-21.  

As a supportive factor for gas prices, the Edison Electric Institute reported on Wednesday that US (lower-48) electricity output in the week ended January 3 rose +6.7% y/y to 82,732 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 3 rose +3.0% y/y to 4,306,606 GWh.

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 112.6 bcf/day (+10.9% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 89.5 bcf/day (-26.9% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 18.4 bcf/day (-7.7% w/w), according to BNEF.

The consensus is that Thursday's weekly EIA nat-gas inventories will decline by -109 bcf.

Last 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 January 4, gas storage in Europe was 60% full, compared to the 5-year seasonal average of 73% full for this time of year.

Baker Hughes reported last 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.