Natural Gas Prices Surge Amid Cold Weather Forecasts
February Nymex natural gas (NGG25) on Tuesday closed up +0.158 (+4.72%), nearing Monday’s 5-month high.
Price Rally Driven by Forecast Changes
Nat-gas prices increased on Tuesday as colder weather was predicted. Maxar reported that from January 3-7, temperatures in the Midwest and South would drop. Additionally, EBW Analytics Group noted that a cold spell in mid-January could potentially disrupt nat-gas production in the southern U.S.
Production and Demand Figures
On Tuesday, Lower-48 state dry gas production reached 105.0 bcf/day, a decline of 0.6% from the previous year, according to BNEF. In contrast, gas demand in these states was 95.2 bcf/day, which is a significant increase of 24% year-over-year. Meanwhile, LNG net flows to U.S. export terminals also saw a rise, hitting 14.1 bcf/day, up 1.3% week-over-week.
Electricity Production Boosts Gas Demand
An uptick in U.S. electricity generation is encouraging for nat-gas usage among utilities. Data from the Edison Electric Institute revealed that total electricity output in the week ending December 14 increased by 2.97% year-over-year to 80,641 GWh, while the output for the rolling 52-week period rose by 2.02% to 4,175,618 GWh.
Inventories and Market Outlook
Last Thursday’s weekly EIA report lent a slightly bullish sentiment to nat-gas prices. For the week ending December 13, inventories dropped by 125 bcf, aligning with expectations but exceeding the 5-year average draw of 92 bcf. As of December 13, inventories were 1.3% higher year-over-year and 3.8% above the 5-year seasonal average, indicating sufficient supplies. In Europe, gas storage levels were recorded at 77% as of December 17, slightly lower than the 5-year average of 80%.
Rig Count Insights
Baker Hughes reported that the count of active nat-gas drilling rigs in the U.S. decreased by one to 102 as of December 20. This count remains slightly higher than the 3.5-year low of 94 rigs noted on September 6. Active rigs have been on a downward trend since peaking at a 5.25-year high of 166 in September 2022, down from a pandemic low of 68 in July 2020, based on data spanning back to 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.
The views and opinions expressed herein are the author’s own and do not necessarily reflect those of Nasdaq, Inc.
