Natural Gas Prices Drop as Warmer Weather Cuts Demand

January Nymex Natural Gas Closes Down Amidshifting Forecasts

January Nymex natural gas (NGF25) on Monday closed lower by -0.066 (-2.01%).

On Monday, January natural gas prices saw a moderate decline, fueled by revised US weather forecasts predicting warmer conditions for the rest of the month. This shift is likely to lessen heating demand for natural gas. Maxar Technologies reported significant changes in forecasts, with much above-normal temperatures expected in the East from December 26-30.

According to BNEF, Lower-48 state dry gas production on Monday stood at 104.6 bcf/day, marking a -1.0% decrease year-over-year. On the other hand, gas demand in the Lower-48 states was at 90.8 bcf/day, indicating an increase of +5.6% year-over-year. Meanwhile, LNG net flows to US LNG export terminals reached 13.9 bcf/day, gaining +10.5% week-over-week.

The uptick in US electricity production contributes positively to natural gas demand from utility companies. The Edison Electric Institute noted last Wednesday that total US electricity output in the week ending December 7 rose by +10.87% year-over-year to 83,412 GWh (gigawatt hours). Additionally, for the 52-week period ending December 7, the output climbed +1.96% year-over-year, totaling 4,173,295 GWh.

Recent data from last Thursday’s weekly EIA report painted a favorable picture for natural gas prices. For the week ending December 6, inventories decreased by -190 bcf, which was larger than the expected -168 bcf draw and surpassed the 5-year average draw of -71 bcf for this period. As of December 6, natural gas inventories were up +2.3% year-over-year and +4.6% above their 5-year seasonal average, indicating a healthy supply. In Europe, gas storage levels were at 81% capacity as of December 10, slightly below the 5-year seasonal average of 83% for this time of year.

According to Baker Hughes, the number of active US natural gas drilling rigs rose by +1 rig to 103 in the week ending December 13. This figure is modestly above the 3-and-a-half-year low of 94 rigs noted on September 6. The count of active rigs has decreased significantly from the 5-and-a-quarter year high of 166 rigs reached in September 2022, which was a rebound from the pandemic-era record low of 68 rigs in July 2020, as reported in historical data since 1987.

On the date of publication, Rich Asplund did not hold (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 solely those of the author and do not necessarily reflect those of Nasdaq, Inc.