HomeMost PopularNatural Gas Prices Surge Amidst Strengthening European Markets

Natural Gas Prices Surge Amidst Strengthening European Markets

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Natural Gas Prices Experience Rebound Amid Rising European Demand

Market Trends and Weather Impact Drive Recent Price Movements

February Nymex natural gas (NGG25) on Wednesday closed up by +0.064 (+1.84%).

On Wednesday, February natural gas prices rebounded from a one-month low, finishing moderately higher. This uptick followed significant short covering in the futures market, coinciding with European gas prices soaring to a 15-month high. Initially, prices had declined due to the forecast for spring-like temperatures across the southern United States, which are expected to reduce heating demand. According to NOAA, the southern half of the U.S. from February 3-7 will likely see above-normal temperatures and early spring-like weather.

Expectations for a larger-than-normal draw in weekly U.S. gas supplies further supported natural gas prices. Analysts anticipate that Thursday’s EIA report will show a reduction of -316 bcf for the week ended January 24, significantly higher than the five-year average draw of -189 bcf for this period.

Earlier this month, natural gas prices had surged to a one-year high due to an arctic blast that severely lowered temperatures across the country, sharply increasing heating demand and depleting inventories.

According to BNEF, lower-48 state dry gas production on Wednesday was 105.5 bcf/day, reflecting a yearly increase of +0.3%. Gas demand in these states was reported at 100.8 bcf/day, a 4.4% rise compared to last year. Additionally, LNG net flows to U.S. export terminals were up to 14.3 bcf/day, an impressive +46.1% week-over-week increase.

An uptick in electricity output in the U.S. also bodes well for natural gas demand from utility companies. The Edison Electric Institute revealed that total U.S. electricity output for the week ending January 25 rose by +21.3% year-over-year, reaching 97,259 GWh. Over the past 52 weeks, this output has increased by +2.25% year-over-year to 4,198,401 GWh.

The previous week’s EIA report was slightly bearish for natural gas prices; inventories for the week ending January 17 fell by -223 bcf — a smaller decline than the expected -247 bcf, but still considerably larger than the five-year average of -167 bcf for that time of year. As of January 17, natural gas inventories were up +1.3% year-over-year and +0.7% above their five-year seasonal average, indicating sufficient supply levels. In Europe, gas storage was 56% full as of January 26, which was below the five-year average of 63% for this time of year.

Baker Hughes, last Friday, reported that the number of active U.S. natural gas drilling rigs rose by one to 99 in the week ending January 24. This figure is modestly above the 3.5-year low of 94 rigs noted on September 6. Active rig counts have fallen since they hit a multi-year high of 166 rigs in September 2022, a sharp contrast to the pandemic-era low of 68 rigs recorded in July 2020, the lowest 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 provided for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

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

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