March Nymex natural gas (NGH24) on Friday closed +0.028 (+1.77%).
Nat-gas prices on Friday posted moderate gains as forecasts for colder weather in the U.S. sparked short-covering in nat-gas futures. Forecaster Atmospheric G2 said Friday that above-normal temperatures will end as "seasonably cold air spills into the eastern half of the U.S." from Feb 21-25, which will boost heating demand for nat-gas.
On Thursday, nat-gas prices plummeted to a 3-1/2 year nearest-futures low on warm U.S. winter weather, curbing heating demand for nat-gas and pushing supplies higher. As of February 9, U.S. nat-gas inventories are +15.9% above their 5-year seasonal average.
Nat-gas prices are also under pressure from the announcement by the Freeport LNG nat-gas export terminal in Texas on January 26 that it was forced to shut down one of its three production units for a month for repairs after extreme cold in Texas damaged equipment. Closing one of the units will limit U.S. nat-gas exports and increase U.S. nat-gas inventories.
Lower-48 state dry gas production Friday was 103.7 bcf/day (+4.1% y/y), according to BNEF. Lower-48 state gas demand Friday was 92.6 bcf/day (+5.1% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 13.7 bcf/day (-1.5% 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 Wednesday that total U.S. electricity output in the week ended February 10 rose +0.4% y/y to 75,587 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending February 10 fell -0.3% y/y to 4,099,349 GWh.
Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended February 9 fell -49 bcf, a smaller draw than expectations of -65 bcf and a much smaller draw than the five-year average for this time of year at -149 bcf. As of February 9, nat-gas inventories were up +11.9% y/y and were +15.9% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 67% full as of February 12, above the 5-year seasonal average of 51% 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 February 16 was unchanged at a 5-month high of 121 rigs, moderately 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).
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.
