Colder US Weather Forecasts Boost Nat-Gas Prices

February Nymex natural gas (NGG26) on Tuesday closed up +0.010 (+0.29%),

Feb nat-gas prices added to Monday's sharp rally on Tuesday and posted modest gains.  Expectations of colder US weather, which will boost nat-gas heating demand, are supporting prices.   Forecaster Atmospheric G2 said Tuesday that the outlook has shifted colder for the eastern two-thirds of the US for January 18-22.  Also, forecasts trended "much colder" in the Rockies, Northwest, and Midwest for January 23-27.  

Projections for lower US nat-gas production are supportive for prices.  The EIA on Tuesday cut its forecast for 2026 US dry nat-gas production to 107.4 bcf/day from last month's estimate of 109.11 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

Last Friday, nat-gas prices sank to a 2.5-month nearest-futures low after forecasts of warmer temperatures across the US bolstered the outlook for reduced nat-gas heating demand, allowing storage levels to rebuild.  

US (lower-48) dry gas production on Tuesday was 113.3 bcf/day (+8.4% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 94.9 bcf/day (-18.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 20.4 bcf/day (+12.4% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last 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.

Last Thursday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended January 2 fell by -119 bcf, a larger draw than the market consensus of -13 bcf and much larger than the 5-year weekly average draw of -92 bcf.  As of January 2, nat-gas inventories were down -3.5% y/y and were +1.0% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of January 10, gas storage in Europe was 55% full, compared to the 5-year seasonal average of 70% 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 January 9 fell by -1 to 124 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.