Nat-Gas Prices Retreat as US Temps Expected to Warm

February Nymex natural gas (NGG25) on Tuesday closed down sharply by -0.223 (-6.07%).

Feb nat-gas prices Tuesday retreated and gave back much of Monday's sharp advance after US weather forecasts turned warmer, signaling less heating demand for nat-gas.  NatGasWeather said Tuesday that a brief break in frigid weather is expected over much of the US in mid-month, bringing heating demand for nat-gas closer to normal.

Lower-48 state dry gas production Tuesday was 100.2 bcf/day (-6.9% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 122.9 bcf/day (+17.0% y/y), according to BNEF.  LNG net flows to US LNG export terminals Tuesday were 14.5 bcf/day (+0.9% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Thursday that total US (lower-48) electricity output in the week ended December 28 rose +6.25% y/y to 77,960 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 28 rose +2.59% y/y to 4,181,671 GWh.

The consensus is that Wednesday's weekly EIA nat-gas inventories for the week ended January 3 fell by -42 bcf.

Last Friday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended December 27 fell -116 bcf, a smaller draw than expectations of -128, although more than the 5-year average draw for this time of year of -104 bcf.  As of December 27, nat-gas inventories were down -1.8% y/y and were +4.7% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 70% full as of January 5, below the 5-year seasonal average of 76% 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 3 rose +1 to 103 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
 

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.