March Nymex natural gas (NGH24) on Friday closed +0.029 (+1.41%).

Nat-gas prices Friday recovered from a 9-month nearest-futures low and closed moderately higher.  Fund short covering emerged in nat-gas futures Friday when prices failed to break below $2 MMBtu, a significant support level.   Nat-gas prices have sold off sharply over the past three weeks as unseasonably warm U.S. temperatures have reduced heating demand for nat-gas.  Forecaster Maxar Technologies said Friday that the eastern half of the U.S. is seeing forecasts trend warmer for February 7 to 11.

Nat-gas prices are also 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 Friday was 104.7 bcf/day (+9.3% y/y), according to BNEF.  Lower-48 state gas demand Friday was 89.9 bcf/day (-20% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Friday were 13.8 bcf/day (+2.8% 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 Wednesday that total U.S. electricity output in the week ended January 27 rose +1.0% y/y to 80,177 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending January 27 fell -0.3% y/y to 4,105,901 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices as nat-gas inventories for the week ended January 26 fell -197 bcf, a smaller draw than expectations of -203 bcf but above the 5-year average draw of -185 bcf.  As of January 26, nat-gas inventories were up +2.9% y/y and were +5.1% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 71% full as of January 29, above the 5-year seasonal average of 58% 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 February 2 fell -2 rigs 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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