February Natural Gas Prices Dipped Amid Warm Weather Forecasts

Market Movement and Weather Influence on Gas Prices

February Nymex natural gas (NGF25) closed down -0.066 (-1.93%) on Monday, surrendering part of the +12.7 gain seen from last Tuesday to Friday.

The decline in February nat-gas prices was attributed to predictions of warmer weather in the near term, although a cold snap is still anticipated for January. Maxar projected above-normal temperatures for the central US, whereas the Eastern US can expect near-normal temperatures. Additionally, EBW Analytics Group suggested that a cold spell in mid-January could occur in the southern US, which may result in freeze-offs and disruptions in natural gas production.

Production and Demand Trends for Natural Gas

According to BNEF, dry gas production in the lower-48 states Monday was measured at 103.8 bcf/day, down 1.8% year-over-year. Gas demand in the same region was reported at 103.5 bcf/day, an increase of 30.5% year-over-year. The LNG net flows to US export terminals stood at 14.1 bcf/day, showing a 2.0% rise week-over-week.

An uptick in US electricity generation is boosting natural gas demand from utilities. The Edison Electric Institute announced that total electricity output in the lower-48 states rose +2.97% year-over-year to 80,641 GWh in the week ending December 14. For the 52-week period ending the same date, output also increased by 2.02% year-over-year to 4,175,618 GWh.

Inventory Reports and Market Implications

The Energy Information Administration’s weekly report released last Thursday was slightly bullish for natural gas prices. It noted that inventories fell by -125 bcf for the week ending December 13, matching expectations but exceeding the 5-year average draw of -92 bcf for this time of year. 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 reported at 77% capacity as of December 17, below the 5-year seasonal average of 80%.

Drilling Rig Count Reflects Ongoing Adjustments in Production Levels

Baker Hughes indicated that the count of active US natural gas drilling rigs decreased by one to 102 in the week ending December 20. This number is slightly above the 3-1/2 year low of 94 rigs posted on September 6. The rig count has been declining since reaching a 5-1/4 year high of 166 rigs in September 2022, up from a pandemic-era low of 68 rigs in July 2020, based on data going back to 1987.

On the date of publication, Rich Asplund did not hold (either directly or indirectly) any positions in the securities mentioned in this article. All information and data presented in this article are for informational purposes only. For further information, please view the Barchart Disclosure Policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.