Nat-gas Prices Push Higher as US Temps Cool and Supplies Tighten

Rich Asplund Barchart Thu Feb 6, 2:16PM CST
Triple natural gas flare burning at night by Kirsten Strickland via iStock

March Nymex natural gas (NGH25) on Thursday closed up by +0.048 (+1.43%).

Mar nat-gas prices Thursday posted moderate gains on the outlook for below-normal US temperatures to boost heating demand for nat-gas.  The Commodity Weather Group said Thursday that forecasts shifted colder for much of the US for February 6-20.  Thursday's weekly EIA report was slightly bullish for nat-gas prices after the EIA reported that nat-gas inventories fell -174 bcf, a larger draw than expectations of -171 bcf.

Tightness in US nat-gas supplies is supportive of prices.  Thursday's weekly EIA inventory report showed that US nat-gas inventories as of January 31 are now -4.4% below the five-year average, the widest deficit in over 2 years.  

Lower-48 state dry gas production Thursday was 106.8 bcf/day (+1.7% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 97 bcf/day (+1.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 15 bcf/day (+11.2% 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 Wednesday that total US (lower-48) electricity output in the week ended February 1 rose +6.2% y/y to 81,767 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 1 rose +2.5% y/y to 4,203,156 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended January 31 fell -174 bcf, a larger draw than expectations of -171 bcf and right on the 5-year average draw for this time of year.  As of January 31, nat-gas inventories were down -7.2% y/y and -4.4% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 51% full as of February 4, below the 5-year seasonal average of 59% 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 31 fell -1 to 98 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.