Natural Gas Prices Rise Amid Cold Winter Weather
February Nymex natural gas (NGG25) closed on Thursday with a gain of +0.050 (+1.37%).
On Thursday, February natural gas prices continued their upward trend, following significant increases on Wednesday, reaching a one-week high. Frigid temperatures across the U.S. are driving up heating demand for natural gas, contributing to the rise in prices. Forecaster Maxar Technologies warned that the Midwest and East will experience below-average temperatures through January 18-22, impacting heating needs.
According to BNEF, dry gas production in the lower-48 states on Thursday was recorded at 101 bcf/day, reflecting a decline of 4.3% year-over-year. Conversely, gas demand in these states surged to 121.8 bcf/day, showcasing a significant increase of 16.9% year-over-year. Additionally, LNG net flows to U.S. export terminals reached 14.7 bcf/day, rising 2.5% compared to the previous week.
However, a decrease in U.S. electricity output is likely to reduce natural gas demand from utility providers. The Edison Electric Institute reported that total electricity generation in the week ending January 4 fell by 2.73% year-over-year, totaling 77,5180 GWh (gigawatt hours). In a broader context, electricity output for the 52-week period ending January 4 saw a modest increase of 2.37% year-over-year, reaching 4,179,498 GWh.
The latest weekly EIA report presented slightly bearish signals for natural gas prices, revealing that inventories for the week ending January 3 fell by 40 bcf. This draw was less than the anticipated 42 bcf and significantly below the five-year average draw of 93 bcf for this time of year. As of January 3, natural gas inventories were up 1.1% year-over-year and 6.5% higher than the five-year seasonal average, indicating a healthy supply level. In Europe, gas storage is 69% full as of January 7, which is below the five-year average of 75% for this period.
Baker Hughes noted last Friday that the number of active natural gas drilling rigs in the U.S. rose by one to reach 103 rigs for the week ending January 3. This figure is slightly above the 3.5-year low of 94 rigs seen on September 6. The number of active rigs has decreased from a high of 166 rigs in September 2022, which was a recovery from the pandemic’s record low of 68 rigs recorded in July 2020, the lowest point since data collection began in 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 those of the author and do not necessarily reflect those of Nasdaq, Inc.
