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February Nymex natural gas (NGG26) on Friday closed up by +0.230 (+4.56%).
Feb nat-gas prices settled sharply higher on Friday but remained below Thursday’s 3-year nearest-futures high. Nat-gas prices have surged this week as a historic winter storm that will dive into the US this weekend will boost heating demand and drain nat-gas inventories. Natural gas prices have surged more than 60% this week on forecasts of Arctic weather invading the US, potentially disrupting US gas production as water freezes in gas pipelines. According to AccuWeather, a massive Arctic cold front will descend into the US as far south as Texas this weekend, bringing below-normal temperatures to more than 150 million people across 24 states.
Also, the frigid conditions expected in Texas this weekend, where key gas production sites are located, and infrastructure is less hardened to cold weather, increase the risk of temporary outages and reduced nat-gas production. On Thursday, Texas Governor Abbott issued disaster declarations for more than half the counties in the state ahead of the winter storm.
Projections for lower US nat-gas production are supportive for prices. The EIA last 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 Friday was 109.6 bcf/day (+8.7% y/y), according to BNEF. Lower-48 state gas demand on Friday was 126.0 bcf/day (-0.5% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Friday were 19.8 bcf/day (+5.3% w/w), according to BNEF.
As a negative factor for gas prices, the Edison Electric Institute reported last 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.
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 21, gas storage in Europe was 48% full, compared to the 5-year seasonal average of 62% full for this time of year.
Baker Hughes reported 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.
