March Nymex natural gas (NGH25) on Monday closed up sharply by +0.308 (+10.12%).
Mar nat-gas prices Monday surged to a 1-week high and settled sharply higher. Prices rallied on forecasts for significantly colder US temperatures that will boost heating demand for nat-gas. The Commodity Weather Group said Monday that beginning later this week, it expects below-normal temperatures across most of the northern half of the US for most of this month. Short covering in nat-gas prices also emerged Monday after European nat-gas prices rallied to a 15-month high.
Tightness in US nat-gas supplies is also supportive of prices. Last Thursday's weekly EIA inventory report showed that US nat-gas inventories as of January 24 are now -4.1% below the five-year average for this time of year, the first time supplies have been below the five-year average in 2 years.
Lower-48 state dry gas production Monday was 106.6 bcf/day (+1.0% y/y), according to BNEF. Lower-48 state gas demand Monday was 90.7 bcf/day (+3.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Monday were 14.7 bcf/day (+2.8% 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 January 25 rose +21.3% y/y to 97,259 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 24 rose +2.25% y/y to 4,198,401 GWh.
Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended January 24 fell -321 bcf, a larger draw than expectations of -316 bcf and a much bigger draw than the 5-year average draw for this time of year of -189 bcf. As of January 24, nat-gas inventories were down -3.3% y/y and were -4.1% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 55% full as of January 28, below the 5-year seasonal average of 62% 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).
