February Nymex natural gas (NGG24) on Friday closed -0.178 (-6.60%).
Nat-gas prices on Friday fell sharply for a second day to a 3-week low, as weather forecasts shift warmer for the end of January and the beginning of February, signaling heating demand for nat-gas could fall further. The Commodity Weather Group Friday forecasted above-normal temperatures for the eastern U.S. from January 29 to February 2.
The current Arctic temperatures engulfing the U.S. have curtailed nat-gas output and led to a surge in heating demand. Lower-48 state dry gas production Friday was 97.4 bcf/day (-4.0% y/y), according to BNEF. Lower-48 state gas demand Friday was 115.8 bcf/day (+29.3% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 13.9 bcf/day (-7.4% w/w), according to BNEF.
The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices. AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.
An increase in U.S. electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total U.S. electricity output in the week ended January 13 rose +6.4% y/y to 82,435 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 13 fell -1.0% y/y to 4,087,720 GWh.
Thursday’s weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended January 12 fell -154 bcf, a smaller draw than expectations of -165 bcf, although above the 5-year average draw of -126 bcf. As of January 12, nat-gas inventories were up +12.8% y/y and were +11.2% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 79% full as of January 15, above the 5-year seasonal average of 67% full for this time of year.
Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ending January 19 rose +3 rigs to 120 rigs, just above the 2-year low of 113 rigs posted September 8. Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
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