February Nymex natural gas (NGG26) on Wednesday closed down sharply by -0.299 (-8.75%),
Feb nat-gas prices plummeted to a 3-month nearest-futures low on Wednesday and settled sharply lower as US temperatures warm and LNG supplies build. The midday update to the Global Forecast System weather model on Wednesday shifted warmer across the eastern half of the US for the January 24-28 period, potentially reducing nat gas heating demand.
Nat-gas prices are also under pressure, as feedgas to Cheniere's Corpus Christi LNG export facility and the Freeport LNG export terminals along the Texas Gulf Coast have been below normal levels over the past two days due to electrical and piping issues. The reduced capacity at the export terminals allows US nat-gas storage levels to build, a bearish factor for prices.
As a negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended January 10 fell -13.15% y/y to 79,189 GWh (gigawatt hours), although US electricity output in the 52-week period ending January 10 rose +2.5% y/y to 4,294,613 GWh.
Projections for lower US nat-gas production are supportive for prices. The EIA on Tuesday 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 110.7 bcf/day (+6.6% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 102.5 bcf/day (-15.5% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 17.6 bcf/day (-6.2% w/w), according to BNEF.
The consensus is for Thursday's weekly EIA nat-gas inventories to decline by -91 bcf.
Last Thursday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended January 2 fell by -119 bcf, a larger draw than the market consensus of -13 bcf and much larger than the 5-year weekly average draw of -92 bcf. As of January 2, nat-gas inventories were down -3.5% y/y and were +1.0% above their 5-year seasonal average, signaling ample nat-gas supplies. As of January 12, gas storage in Europe was 53% full, compared to the 5-year seasonal average of 69% 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 9 fell by -1 to 124 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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