March Nymex natural gas (NGH25) on Thursday erased an early rally and closed down by -0.128 (-2.99%).
March nat-gas fell from a 2-year high Thursday and closed moderately lower after warmer US weather forecasts sparked long liquidation in nat-gas -futures. Forecaster Maxar Technologies said on Thursday that forecasts moved warmer for parts of the central US from February 25 to March 1, which will reduce heating demand for nat-gas. Thursday's nat-gas prices initially rallied to a 2-year high as a cold snap and storms moved through the US. Also, Thursday's weekly EIA inventory report showed nat-gas inventories fell -196 bcf, a larger draw than expectations of -193 bcf.
Tightness in nat-gas supplies is supporting the recent rally in nat-gas prices. As of February 14, EIA nat-gas inventories were -5.3% below their 5-year average, the tightest supplies have been in over two years.
In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. Bloomberg reported that the Trump administration is close to approving its first LNG export project, a Commonwealth LNG export facility in Louisiana. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.
Lower-48 state dry gas production Thursday was 101.1 bcf/day (-3.9% y/y), according to BNEF. Lower-48 state gas demand Thursday was 129.8 bcf/day (+39.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 15.3 bcf/day (+0.4% 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 Thursday that total US (lower-48) electricity output in the week ended February 15 rose +10.9% y/y to 84,714 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 15 rose +2.8% y/y to 4,215,106 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended February 14 fell -196 bcf, a larger draw than expectations of -193 bcf and a larger draw than the 5-year average draw for this time of year of -145 bcf. As of February 14, nat-gas inventories were down -14.9% y/y and -5.3% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 43% full as of February 18, versus the 5-year seasonal average of 53% 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 February 14 rose +1 to 101 rigs, modestly above the 3-1/2 year low of 94 rigs posted on September 6, 2024. 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).
