February Nymex natural gas (NGG24) on Tuesday closed -0.413 (-12.47%).

Nat-gas prices on Tuesday plunged as U.S. weather forecasts shifted warmer, which should reduce heating demand for nat-gas.   Forecaster Maxar Technologies said below-normal temperatures currently gripping most of the U.S. will dissipate later in the month, with the eastern half of the country seeing above-normal temperatures.  

The current arctic temperatures engulfing the U.S. have curtailed nat-gas output and led to a surge in heating demand.  Lower-48 state dry gas production Tuesday was 95.4 bcf/day (-5.6% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 128.5 bcf/day (+44% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Tuesday were 11.7 bcf/day (-17.6% w/w), according to BNEF.

The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices.  AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.

An increase in U.S. electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total U.S. electricity output in the week ended January 6 rose +9.0% y/y to 79,691 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 6 fell -1.2% y/y to 4,082,730 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended January 5 fell -140 bcf, a larger draw than expectations of -121 bcf and well above the 5-year average draw of -89 bcf.  As of January 5, nat-gas inventories were up +15.0% y/y and were +11.6% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 79% full as of January 14, above the 5-year seasonal average of 68% full for this time of year.

Baker Hughes reported last Friday that the number of active U.S. nat-gas drilling rigs in the week ending January 12 fell -1 rig to 117 rigs, just above the 2-year low of 113 rigs posted September 8.  Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
 



More Natural Gas News from
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  • Nat-Gas Prices Slump on Expectations for U.S. Gas Inventories to Remain Abundant
  • Nat-Gas Prices Surge on the Outlook for Arctic Temps to Engulf the U.S.

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