Natural Gas Prices Surge as Polar Vortex Approaches

Market Influences and Strong Demand Drive Price Increase

March Nymex natural gas (NGH25) on Friday closed up +0.097 (+2.67%).

On Friday, natural gas prices continued to rise as forecasts predicted a Polar Vortex moving into the central United States. The Commodity Weather Group noted that temperature forecasts have become colder for the Midwest and southern U.S. from February 19-23.

Support for prices also came from Thursday’s release revealing that EIA natural gas inventories decreased by -100 bcf for the week ending February 7, exceeding expectations of a -91 bcf draw.

In a significant long-term development, President Trump lifted the Biden administration’s pause on gas export projects in January. This decision means that around a dozen LNG export projects are now under consideration. Bloomberg reported that the administration is nearing approval for its first project, a Commonwealth LNG export facility in Louisiana. Greater U.S. capacity for LNG exports is likely to increase demand for domestic natural gas, which would help support prices.

As per BNEF, dry gas production in the lower-48 states on Friday reached 106.4 bcf/day, marking a 0.5% increase year-over-year. Additionally, gas demand in the lower-48 states climbed to 110.0 bcf/day, a 14.2% rise compared to the previous year. LNG net flows to U.S. LNG export terminals also increased, reaching 15.4 bcf/day, up 3.8% week-over-week.

Higher U.S. electricity output is positive for natural gas demand from utility companies. The Edison Electric Institute reported that total electricity output in the lower-48 states rose by 4.8% year-over-year to 79,239 GWh (gigawatt hours) during the week ending February 8. Over the previous 52 weeks, electricity output grew by 2.6% year-over-year to 4,206,808 GWh.

Thursday’s EIA report contributed to the bullish sentiment for natural gas prices as inventories for the week ending February 7 showed a larger draw of -100 bcf, compared to expectations of -91 bcf. However, this was a smaller decline than the 5-year average of -144 bcf for this time of year. As of February 7, natural gas inventories were down -9.2% year-over-year and -2.8% below the 5-year seasonal average, indicating tighter supplies. In Europe, gas storage was reported to be 47% full as of February 11, significantly higher than the 5-year seasonal average of only 5% for this period.

Baker Hughes reported Friday that the count of active U.S. natural gas drilling rigs increased by 1 to 101 rigs in the week ending February 14. This number remains slightly above the 3-and-a-half-year low of 94 rigs reached in September 2024. The rig count has decreased significantly since peaking at a 5-and-a-quarter-year high of 166 rigs in September 2022, which followed a record low of 68 rigs during the pandemic in July 2020.

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.

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