March Nymex natural gas (NGH26) on Monday closed down by -0.284 (-8.30%).
March nat-gas prices on Monday sold off to a 3-week low and settled sharply lower on the outlook for warmer temperatures across large parts of the US, which will likely reduce nat-gas heating demand. The Commodity Weather Group said Monday that above-average temperatures are expected across the Midwest and South through February 20. Nat-gas prices also have some negative carryover from last Friday when Baker Hughes reported that active US nat-gas drilling rigs increased to a 2.5-year high, suggesting higher near-term gas production.
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 Monday was 113.4 bcf/day (+2.2% y/y), according to BNEF. Lower-48 state gas demand on Monday was 104.0 bcf/day (+3.3% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Monday were 19.2 bcf/day (+4.9% w/w), according to BNEF.
Projections for lower US nat-gas production are supportive for prices. The EIA on January 13 cut its forecast for 2026 US dry nat-gas production to 107.4 bcf/day from last month's estimate of 109.11 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.
As a bullish factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended January 31 rose +21.4% y/y to 99,925 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 31 rose +2.39% y/y to 4,303,577 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.
