Abundant Nat-Gas Supplies Pressure Prices

February Nymex natural gas (NGG26) on Friday closed down by -0.025 (-0.80%),

Feb nat-gas prices settled lower on Friday but remained above Thursday's 3-month nearest-futures low.   Abundant US supplies are weighing on nat-gas prices after Thursday's weekly EIA report showed nat-gas storage levels +3.4% above their 5-year seasonal average.  

Losses in nat-gas prices were contained on Friday amid forecasts of colder-than-normal US temperatures, potentially boosting nat-gas heating demand.  The Commodity Weather Group said Friday that below-normal temperatures are seen across much of the northern US and East for the January 21-30 period.  

Nat-gas prices are also under pressure, as feedgas to Cheniere's Corpus Christi LNG export facility and the Freeport LNG export terminals along the Texas Gulf Coast have been below normal levels this week due to electrical and piping issues.  The reduced capacity at the export terminals allows US nat-gas storage levels to build, a bearish factor for prices.

As a negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended January 10 fell -13.15% y/y to 79,189 GWh (gigawatt hours), although US electricity output in the 52-week period ending January 10 rose +2.5% y/y to 4,294,613 GWh.

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.

US (lower-48) dry gas production on Friday was 113.0 bcf/day (+8.7% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 104.9 bcf/day (-2.4% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 19.8 bcf/day (+2.5% w/w), according to BNEF.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended January 9 fell by -71 bcf, a smaller draw than the market consensus of -91 bcf and well below the 5-year weekly average draw of -146 bcf.  As of January 9, nat-gas inventories were up +2.2% y/y and were +3.4% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of January 13, gas storage in Europe was 52% full, compared to the 5-year seasonal average of 68% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending January 16 fell by -2 to 122 rigs, falling further 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.