March Nymex natural gas (NGH26) on Wednesday closed up by +0.054 (+1.85%).
March nat-gas prices recovered from a 4.25-month nearest-futures low on Wednesday and settled higher. Short-covering emerged in nat-gas futures on Wednesday after longer-term weather forecasts called for below-normal temperatures next month, potentially boosting nat-gas heating demand. On Wednesday, EBW Analytics Group said the probability increased for a "polar vortex" weather pattern dropping into the lower 48 US states in the middle of next month.
Nat-gas prices initially moved lower Wednesday after the Commodity Weather Group said forecasts shifted warmer, with above-normal temperatures expected across much of the US through the first week of March, potentially reducing nat-gas heating demand. Also, expectations for a smaller-than-average draw in weekly US nat-gas storage are bearish for prices. The consensus is that Thursday's weekly EIA nat-gas inventories fell by -49 bcf for the week ended February 20, a much smaller draw than the five-year average for the week of -168 bcf.
US (lower-48) dry gas production on Wednesday was 112.3 bcf/day (+7.1% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 93.1 bcf/day (+14.6% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 19.5 bcf/day (unchanged w/w), according to BNEF.
Projections for higher US nat-gas production are bearish for prices. Last Tuesday, the EIA 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 posting a 2.5-year high last Friday.
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.
As a negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended February 21 fell -13.46% y/y to 78,464 GWh (gigawatt hours). However, US electricity output in the 52-week period ending February 21 rose +1.7% y/y to 4,302,222 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended February 13 fell by -144 bcf, a smaller draw than the market consensus of -149 bcf and the 5-year weekly average draw of -151 bcf. As of February 13, nat-gas inventories were down -1.5% y/y and -5.6% below their 5-year seasonal average, signaling tight nat-gas supplies. As of February 22, gas storage in Europe was 31% full, compared to the 5-year seasonal average of 47% 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 20 was unchanged at a 2.5-year high of 133 rigs. In the past year, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.
