March Nymex natural gas (NGH26) on Wednesday closed up by +0.044 (+1.41%).
March nat-gas prices recovered from a 4-week nearest-futures low on Wednesday and moved higher as short-covering emerged in anticipation of a greater-than-normal withdrawal of US nat-gas storage levels. The consensus is that Thursday's weekly EIA nat-gas inventories will decline by -257 bcf for the week ended February 6, a much larger draw than the five-year average for this time of year of -146 bcf.
Nat-gas prices initially moved lower on Wednesday amid forecasts of above-average US temperatures, which will reduce nat-gas heating demand. The Commodity Weather Group said Wednesday that forecasts shifted overnight to show even warmer weather across the eastern two-thirds of the US through February 20.
Projections for higher US nat-gas production are also bearish for prices. The EIA on Tuesday raised its forecast for 2026 US dry nat-gas production to 109.97 bcf/day from last month's estimate of 108.82 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs last Friday posting a 2.5-year high.
Natural gas prices surged to a 3-year high on January 28, driven by the massive storm that disrupted the US with Arctic cold weather. The well below normal temperatures caused freeze-ups in gas wells, disrupted production in Texas and elsewhere, and drove a spike in demand for natural gas for heating. About 50 billion cubic feet of natural gas came offline, or about 15% of total US natural gas production, due to freeze-ups.
US (lower-48) dry gas production on Wednesday was 112.8 bcf/day (+7.1% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 99.0 bcf/day (-11.7% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 19.6 bcf/day (-0.1% w/w), according to BNEF.
As a bullish factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended February 7 rose +15.42% y/y to 91,4595 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 7 rose +2.59% y/y to 4,315,797 GWh.
Last Thursday's weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended January 30 fell by a record -360 bcf, a smaller draw than the market consensus of -378 bcf but well above the 5-year weekly average draw of -190 bcf. As of January 30, nat-gas inventories were up +2.8% y/y and were -1.1% below their 5-year seasonal average, signaling tighter nat-gas supplies. As of February 7, gas storage in Europe was 37% full, compared to the 5-year seasonal average of 54% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending February 6 rose by +5 to 130 rigs, matching the 2.5-year high first set on November 28. In the past year, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.
