March Nymex natural gas (NGH26) on Wednesday closed higher by +0.154 (+4.65%).
March nat-gas prices moved sharply higher on Wednesday amid the outlook for colder US weather to persist and expectations of a record drawdown in weekly nat-gas inventories on Thursday. The Commodity Weather Group said Wednesday that very cold weather is expected in the Northeast through February 8, potentially boosting nat-gas heating demand.
Nat-gas prices also have support from expectations of a record drawdown in US storage supplies. The consensus is that Thursday's weekly EIA nat-gas inventories will fall by -379 bcf for the week ended January 30, well above the five-year average for this time of year of -190 bcf and the largest weekly withdrawal on record.
Natural gas prices surged to a 3-year high last Wednesday, driven by the massive storm that just crossed the US and the Arctic blast of cold weather. The cold weather caused freeze-ups in gas wells, disrupted production in Texas and elsewhere, and drove a spike in demand for natural gas for heating. About 50 billion cubic feet of natural gas came offline last week, or about 15% of total US natural gas production.
US (lower-48) dry gas production on Wednesday was 111.2 bcf/day (+5.6% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 115.6 bcf/day (+18.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 19.7 bcf/day (+10.3% w/w), according to BNEF.
Projections for lower US nat-gas production are supportive for prices. The EIA on January 13 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.
As a bullish factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended January 31 rose +21.4% y/y to 99,925 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 31 rose +2.39% y/y to 4,303,577 GWh.
Last Thursday's weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended January 23 fell by -242 bcf, a larger draw than the market consensus of -238 bcf and the 5-year weekly average draw of -208 bcf. As of January 23, nat-gas inventories were up +9.8% y/y and were +5.3% above their 5-year seasonal average, signaling ample nat-gas supplies. As of February 2, gas storage in Europe was 40% full, compared to the 5-year seasonal average of 56% 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 30 rose by +3 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.
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.
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