February Nymex natural gas (NGG26) on Tuesday closed down -0.173 (-4.91%),
Feb nat-gas prices extended their week-long plunge on Tuesday to a new 2.25-month nearest-futures low. Forecasts for above-normal US temperatures that will curb heating demand and allow for nat-gas inventories to rebuild are hammering prices. Forecaster Xweather said Tuesday that above-normal temperatures will grip nearly the entire US through January 10, with more seasonal weather in the second half of the month.
Higher US nat-gas production is also bearish for prices. The EIA on December 9 raised its forecast for 2025 US nat-gas production to 107.74 bcf/day from its November estimate of 107.70 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.
US (lower-48) dry gas production on Tuesday was 112.2 bcf/day (+8.7% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 89.5 bcf/day (-25.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 18.5 bcf/day (-6.0% w/w), according to BNEF.
As a supportive factor for gas prices, the Edison Electric Institute reported on December 10 that US (lower-48) electricity output in the week ended December 6 rose +2.3% y/y to 85,330 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 6 rose +2.84% y/y to 4,291,665 GWh.
Last Wednesday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended December 26 fell by -38 bcf, a smaller draw than the market consensus of -51 bcf and much smaller than the 5-year weekly average draw of -120 bcf. As of December 26, nat-gas inventories were down -1.1% y/y and were +1.7% above their 5-year seasonal average, signaling ample nat-gas supplies. As of January 4, gas storage in Europe was 60% full, compared to the 5-year seasonal average of 73% full for this time of year.
Baker Hughes reported last Tuesday that the number of active US nat-gas drilling rigs in the week ending January 2 fell by -2 to 125 rigs, modestly below the 2.25-year high of 130 set on November 28. In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.
