Nat-Gas Prices Rally on Colder Forecast for Early-January

February Nymex natural gas (NGG25) on Tuesday closed up +0.158 (+4.72%), stopping just short of Monday’s 5-month high.

Feb nat-gas prices rallied on Tuesday due to colder weather forecasts.  Maxar called for colder temps in the Midwest and South for Jan 3-7.  Also, EBW AnalyticsGroup recently said the longer-range weather outlook is for a mid-January cold spell in the southern US that could lead to freeze-offs and nat-gas production disruptions.

Lower-48 state dry gas production Tuesday was 105.0 bcf/day (-0.6% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 95.2 bcf/day (+24% y/y), according to BNEF.  LNG net flows to US LNG export terminals Tuesday were 14.1 bcf/day (+1.3% 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 Wednesday that total US (lower-48) electricity output in the week ended December 14 rose +2.97% y/y to 80,641 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 14 rose +2.02% y/y to 4,175,618 GWh.

Last Thursday’s weekly EIA report was slightly bullish for nat-gas prices since nat-gas inventories for the week ended December 13 fell -125 bcf, right on expectations but a much larger draw than the 5-year average draw for this time of year of -92 bcf.  As of December 13, nat-gas inventories were up +1.3% y/y and were +3.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 77% full as of December 17, below the 5-year seasonal average of 80% 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 December 20 fell -1 rig to 102 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,

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