Natural Gas Prices Surge Amid Colder Weather Forecasts
Heating Demand Boosts Natural Gas Prices to a 3-Week High
January Nymex natural gas (NGF25) closed sharply higher on Thursday, gaining +0.210 (+6.22%). Prices rallied to a 3-1/2 week peak, driven by forecasts indicating a drop in temperatures across the U.S. that will increase heating demand. According to NatGasWeather, updated weather models predict colder conditions moving into the northern half of the U.S. from January 1-3. Additionally, EBW AnalyticsGroup highlighted a growing expectation for a cold snap in mid-January across the southern U.S., which could impact natural gas production.
On Thursday, dry gas production in the lower-48 states averaged 104 bcf/day, reflecting a 2.5% year-over-year decline, as reported by BNEF. Gas demand in the same region was recorded at 101.1 bcf/day, down 2.2% year-over-year. However, net flows of liquefied natural gas (LNG) to U.S. export terminals rose to 13.7 bcf/day, marking a 6.1% increase week-over-week.
Rising electricity output has positive implications for natural gas demand from utility companies. The Edison Electric Institute revealed that total electricity output in the lower-48 states for the week ending December 14 climbed +2.97% year-over-year, reaching 80,641 GWh (gigawatt hours). Over the 52-week period ending December 14, electricity generation also increased, rising +2.02% year-over-year to 4,175,618 GWh.
The latest weekly EIA report provided a slight boost to natural gas prices. For the week ending December 13, natural gas inventories fell by -125 bcf, aligning with expectations but significantly exceeding the five-year average draw of -92 bcf for this time of year. As of December 13, inventories were up +1.3% year-over-year and +3.8% above their five-year seasonal average, indicating sufficient natural gas supplies. In Europe, gas storage levels were at 77% as of December 17, still below the five-year seasonal average of 80%.
According to Baker Hughes, the number of active natural gas drilling rigs in the U.S. increased by one to reach 103 during the week ending December 13. This figure is modestly above a 3-1/2 year low of 94 rigs recorded on September 6. Active rig counts have declined from a 5-1/4 year high of 166 rigs in September 2022 and are significantly higher than the pandemic-era low of 68 rigs seen in July 2020 (based on 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
