March Nymex natural gas (NGH26) on Tuesday closed down by -0.212 (-6.54%).
March nat-gas prices sank to a 4-month nearest-futures low on Tuesday and settled sharply lower. The outlook for warmer-than-normal US weather, which will curb nat-gas heating demand, is weighing on prices. On Tuesday, the Commodity Weather Group said above-normal temperatures are expected across the eastern half of the US through February 21, while mostly normal seasonal weather is expected across the country through February 28.
US (lower-48) dry gas production on Tuesday was 114.4 bcf/day (+9.7% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 86.2 bcf/day (-27.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 20.0 bcf/day (+2.0% 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 bullish factor for gas prices, the Edison Electric Institute reported last 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 February 6 fell by -249 bcf, a smaller draw than the market consensus of -258 bcf but well above the 5-year weekly average draw of -146 bcf. As of February 6, nat-gas inventories were down -3.6% y/y and -5.5% below their 5-year seasonal average, signaling tight nat-gas supplies. As of February 15, gas storage in Europe was 34% full, compared to the 5-year seasonal average of 50% 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 13 rose by +3 to 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.
