February Nymex natural gas (NGG26) on Wednesday closed up by +0.506 (+7.28%).
Feb nat-gas prices on Wednesday rallied sharply to a fresh 3.25-year high. Nat-gas prices recovered from early losses on Wednesday and moved sharply higher as weather forecasts shifted slightly colder for the eastern half of the US for the first week of February, potentially boosting heating demand and drawing down nat-gas inventories.
Gains in nat-gas prices accelerated into the close on Wednesday as funds covered short positions, as Wednesday was the last trading day for the February Nymex nat-gas futures contract.
Nat-gas prices have soared more than +120% over the past week, driven by the massive storm that just crossed the US and the Arctic blast of cold weather. The cold weather caused freeze-ups in gas wells, disrupted production in Texas and elsewhere, and drove a spike in demand for natural gas for heating. About 50 billion cubic feet of natural gas were offline Saturday through Monday, or about 15% of total US natural gas production. Some nat-gas production is slowly coming back online as of Wednesday.
Expectations that the recent Arctic blast prompted a large drawdown in nat-gas storage are another bullish factor for prices. The consensus is that Thursday's weekly EIA nat-gas inventories declined by -239 bcf in the week ended January 23, a larger draw than the five-year average for this time of year of -208 bcf.
Projections for lower US nat-gas production are supportive for prices. The EIA on January 13 cut its forecast for 2026 US dry nat-gas production to 107.4 bcf/day from last month's estimate of 109.11 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.
US (lower-48) dry gas production on Wednesday was 102.8 bcf/day (-1.2% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 133.0 bcf/day (+34.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 16.9 bcf/day (-12.4% w/w), according to BNEF.
As a negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended January 24 fell -6.3% y/y to 91,131 GWh (gigawatt hours), although US electricity output in the 52-week period ending January 24 rose +2.1% y/y to 4,286,060 GWh.
Last Thursday's weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended January 16 fell by -120 bcf, a larger draw than the market consensus of -98 bcf but smaller than the 5-year weekly average draw of -191 bcf. As of January 16, nat-gas inventories were up +6.0% y/y and were +6.1% above their 5-year seasonal average, signaling ample nat-gas supplies. As of January 25, gas storage in Europe was 45% full, compared to the 5-year seasonal average of 60% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending January 23 was unchanged at 122 rigs, modestly below the 2.25-year high of 130 set on November 28. In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.
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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