Nat-gas Prices Little Changed as European Gas Prices Surge

March Nymex natural gas (NGH25) on Friday closed down by -0.003 (-0.10%).

Mar nat-gas prices Friday dropped to an 8-week low but settled slightly lower.  Short covering emerged in nat-gas prices Friday after European nat-gas prices rallied to a 15-month high.   Since posting a 1-year nearest-futures high two weeks ago, nat-gas prices have been under pressure due to forecasts for warmer US weather, which curbs heating demand for nat-gas.  Forecaster Atmospheric G2 said Friday that well above normal temperatures are expected across the southern half of the US  for February 5-9.  

Tightness in US nat-gas supplies is also supportive of prices.  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 Friday was 106.5 bcf/day (+2.3% y/y), according to BNEF.  Lower-48 state gas demand Friday was 94.4 bcf/day (-0.4% y/y), according to BNEF.  LNG net flows to US LNG export terminals Friday were 14.7 bcf/day (+28% 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 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.

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 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).