February Nymex natural gas (NGG24) on Friday closed +0.141 (+5.48%).

Nat-gas prices on Friday recovered from early losses and closed moderately higher.  Short covering emerged in nat-gas after U.S. weather forecasts turned colder, which would boost heating demand for nat-gas.  NatGasWeather said forecasts for U.S. temperatures turned colder for the western U.S. from Feb 1-8, although the central and eastern U.S. should remain above normal.

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.

Lower-48 state dry gas production Friday was 103.3 bcf/day (+3.9% y/y), according to BNEF.  Lower-48 state gas demand Friday was 85.7 bcf/day (-16.6% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Friday were 14.3 bcf/day (+5.4% w/w), according to BNEF.

A sharp increase in U.S. electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended January 20 jumped +22.6% y/y to 94,267 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 20 fell -0.4% y/y to 4,105,100 GWh.

Thursday's weekly EIA report was bullish for nat-gas prices as nat-gas inventories for the week ended January 19 fell -326 bcf, a larger draw than expectations of -318 bcf, and well above the 5-year average draw of -148 bcf.  As of January 19, nat-gas inventories were up +4.5% y/y and were +5.2% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 74% full as of January 22, above the 5-year seasonal average of 63% full for this time of year.

Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ending January 26 fell -1 rig to 119 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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