February Nymex natural gas (NGG26) on Thursday closed down -0.118 (-3.35%),

Feb nat-gas prices tumbled on Thursday amid the outlook for far warmer-than-normal US temperatures, which is expected to curb heating demand for nat-gas.  Forecaster WSI said Thursday that near-term forecasts show broad swaths of above-normal temperatures across the western and central US over the next week.

Nat-gas prices fell on Thursday despite a bullish weekly EIA inventory report that showed nat-gas inventories fell -119 bcf last week, a larger draw than expectations of -113 bcf.  

Higher US nat-gas production is bearish for prices.  The EIA on December 9 raised its forecast for 2025 US nat-gas production to 107.74 bcf/day from its November estimate of 107.70 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 Thursday was 111.0 bcf/day (+8.7% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 88.0 bcf/day (-29.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 19.2 bcf/day (-1.5% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported on Wednesday that US (lower-48) electricity output in the week ended January 3 rose +6.7% y/y to 82,732 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 3 rose +3.0% y/y to 4,306,606 GWh.

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 6, gas storage in Europe was 58% full, compared to the 5-year seasonal average of 72% full for this time of year.

Baker Hughes reported last Tuesday that the number of active US nat-gas drilling rigs in the week ending January 2 fell by -2 to 125 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.
 

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