March Nymex natural gas (NGH24) on Tuesday closed +0.023 (+1.12%).

Nat-gas prices Tuesday recovered from an 8-3/4 month nearest-futures low and posted moderate gains.  Fund buying emerged in nat-gas futures near significant support at $2/mmbtu, which sparked short covering and pushed prices higher.  Nat-gas prices have sold off over the past three weeks as unseasonably warm U.S. temperatures have reduced heating demand for nat-gas.  Also, an extended outage at an LNG export terminal in Texas threatens to limit U.S. nat-gas exports and boost domestic supplies.  Atmospheric G2 said Tuesday that most of the eastern half of the U.S. will experience above-normal temperatures from February 4 to 8.

Nat-gas prices are under pressure after the Freeport LNG nat-gas export terminal in Texas announced last Friday that it is shutting one of its three production units for a month for repairs after extreme cold in Texas damaged equipment.  The closure of one of the units will limit U.S. nat-gas exports and increase U.S. nat-gas supplies.

Lower-48 state dry gas production Tuesday was 104.3 bcf/day (+5.6% y/y), according to BNEF.  Lower-48 state gas demand Tuesday was 95.4 bcf/day (-13.7% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Tuesday were 14.1 bcf/day (-0.1% 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.

A sharp 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 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.

Last 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 72% full as of January 28, above the 5-year seasonal average of 59% 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 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).
 



More Natural Gas News from
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  • Nat-Gas Prices Give Up Early Gains on Forecasts for Warm U.S. Temps
  • Nat-Gas Prices Surge on Expectations for Weekly EIA Inventories to Plunge

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