March Nymex natural gas (NGH26) on Friday closed up by +0.436 (+11.13%).
March nat-gas prices rallied sharply on Friday, but remained below Wednesday’s 3-year nearest-futures (G26) high. Nat-gas prices have carryover support from Thursday’s weekly EIA inventory report that showed a larger-than-expected draw in gas storage levels. Also, nat-gas prices are climbing as the current Arctic cold blast enveloping the US is boosting heating demand and bolstering expectations for another above-average drawdown in nat-gas storage.
Forecasts of below-normal US temperatures to linger will increase heating demand and are bullish for nat-gas prices. The Commodity Weather Group said Friday that below-normal temperatures will persist in the Upper Midwest, Mid-Atlantic, and Northeast for February 4-8.
Natural gas prices have soared by more than 120% over the past week, hitting a 3-year high on Wednesday, 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.
US (lower-48) dry gas production on Friday was 110.0 bcf/day (+3.4% y/y), according to BNEF. Lower-48 state gas demand on Friday was 128.7 bcf/day (+38.4% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Friday were 17.7 bcf/day (-8.3% w/w), according to BNEF.
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.
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.
Thursday’s weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended January 23 fell by -242 bcf, a larger draw than the market consensus of -238 bcf and the 5-year weekly average draw of -208 bcf. As of January 23, nat-gas inventories were up +9.8% y/y and were +5.3% above their 5-year seasonal average, signaling ample nat-gas supplies. As of January 28, gas storage in Europe was 43% full, compared to the 5-year seasonal average of 58% 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 30 rose by +3 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.
