Natural Gas Prices Surge Amid Cold Snap and Increased Demand
March Nymex natural gas (NGH25) increased by +0.282 (+7.57) on Tuesday, marking the sixth consecutive daily rise.
Weather Boosts Prices
Prices for natural gas continued last week’s surge as cold weather and storms hit parts of the United States. According to Maxar, forecasts for the central and eastern US have turned colder from February 28 to March 4.
Inventory Draw and Export Approvals Strengthen Trends
Support for these price increases came from last Thursday’s report indicating that EIA natural gas inventories dropped by -100 bcf for the week ending February 7. This decline was greater than the expected -91 bcf draw.
In a move that could positively impact national gas prices over the longer term, President Trump lifted the Biden administration’s pause on gas export projects in January. This opened the door for about a dozen LNG export projects to be actively considered. Bloomberg highlighted that the Trump administration might soon approve its first LNG export facility in Louisiana, known as Commonwealth LNG. This expansion of US LNG export capacity is expected to enhance demand for domestic natural gas.
Production and Demand Trends
On Tuesday, Lower-48 state dry gas production reached 106.1 bcf/day, reflecting a year-over-year increase of +0.7%, according to BNEF. Additionally, gas demand in these states hit 122.9 bcf/day, marking a significant rise of +21% year-over-year. LNG net flows to US export terminals were reported at 15.4 bcf/day, a weekly increase of +2.1% as per BNEF data.
Electricity Demand Supports Gas Market
Higher electricity output across the US is anticipated to boost natural gas demand from power providers. The Edison Electric Institute reported a +4.8% year-over-year increase in total US electricity output for the week ending February 8, reaching 79,239 GWh (gigawatt hours). Over a 52-week period, US electricity generation rose by +2.6% year-over-year to 4,206,808 GWh.
Inventory Levels and Rig Count Insights
Last Thursday’s EIA report painted a bullish picture for natural gas prices: inventories fell by -100 bcf, surpassing expectations but still lagging the 5-year average draw 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 average, indicating tight supplies. In Europe, gas storage stood at 47% full as of February 11, compared to only 5% full based on the 5-year average for this period.
Baker Hughes reported a slight increase in active US natural gas drilling rigs. For the week ending February 14, the count rose by +1 to 101 rigs, above the 3.5-year low of 94 rigs recorded on September 6, 2024. Active rigs have decreased since reaching a 5.25-year high of 166 rigs in September 2022, following a pandemic-era low of 68 rigs in July 2020, according to data dating 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
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