February Nymex natural gas (NGG24) on Thursday closed -0.173 (-6.03%).

Nat-gas prices on Thursday tumbled to a 2-week low and closed sharply lower after weekly EIA nat-gas supplies fell less than expected.  The EIA reported that nat-gas inventories fell -154 bcf, a smaller draw than expectations of -165 bcf.

Also, the outlook for warmer-than-normal U.S. temperatures that reduce heating demand for nat gas weighed on prices.  Forecaster Atmospheric G2 said Thursday that above-normal temperatures are expected across most of the U.S. from Jan 28-Feb 1.  

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 Thursday was 97.4 bcf/day (-4.0% y/y), according to BNEF.  Lower-48 state gas demand Thursday was 111.7 bcf/day (+32% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Thursday were 13.4 bcf/day (-9.1% 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 Thursday that total U.S. electricity output in the week ended January 13 rose +6.4% y/y to 82,435 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 13 fell -1.0% y/y to 4,087,720 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended January 12 fell -154 bcf, a smaller draw than expectations of -165 bcf, although above the 5-year average draw of -126 bcf.  As of January 12, nat-gas inventories were up +12.8% y/y and were +11.2% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 79% full as of January 15, above the 5-year seasonal average of 67% 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).
 



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