HomeMost PopularUS Natural Gas Prices Decline from Yearly Peak Amid Warming Temperatures

US Natural Gas Prices Decline from Yearly Peak Amid Warming Temperatures

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Natural Gas Prices Dip After Hitting Yearly High Amid Mixed Weather Expectations

February Nymex natural gas (NGG25) closed down by -0.055 (-1.38%) on Monday.

Market Response to Weather Forecasts

Natural gas prices fell from a one-year peak on Monday, settling moderately lower after an initial surge. Prices had jumped due to predictions of colder temperatures in the U.S., which usually increases demand for heating. However, profit-taking occurred once forecaster Maxar Technologies indicated that warmer temperatures could arrive toward the end of the month.

Production and Demand Trends

According to BNEF, dry gas production in the lower-48 states reached 103.2 billion cubic feet per day (bcf/day) on Monday, marking a 3.6% increase year-over-year. In the same timeframe, gas demand in these states was 115.5 bcf/day, up 0.6% from last year. Notably, LNG net flows to U.S. export terminals declined, standing at 13.9 bcf/day, down 6.3% from the previous week.

The Impact of Electricity Output

A decrease in electricity generation in the U.S. presents challenges for natural gas demand from utilities. The Edison Electric Institute reported that total electricity output in the week ending January 4 fell by 2.73% compared to the previous year, amounting to 77,518 GWh. However, when looking at the data from the previous 52 weeks, electricity output rose by 2.37% compared to last year, totaling 4,179,498 GWh.

Inventory Insights

The latest EIA report provided a slightly bearish outlook for natural gas prices, revealing a reduction in inventories. For the week ending January 3, inventories dropped by 40 bcf, which was less than the anticipated decline of 42 bcf and significantly smaller than the five-year average reduction of 93 bcf for this time of year. As of January 3, inventories were still up 1.1% from last year and 6.5% above the five-year seasonal average, indicating sufficient supply. In Europe, gas storage levels were at 69% as of January 7, below the five-year average of 75% for this season.

Drilling Rig Activity

Baker Hughes reported that the number of active natural gas drilling rigs in the U.S. decreased by three to 100 rigs in the week ending January 10. This figure remains above the recent low of 94 rigs recorded on September 6. The number of active rigs has fallen from a peak of 166 rigs in September 2022, down from a pandemic-era low of 68 rigs in July 2020, marking a significant fluctuation in drilling activity over the past few years.


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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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