March Nymex natural gas (NGH26) on Tuesday closed down by -0.070 (-2.35%).
March nat-gas prices tumbled to a 4.25-month nearest-futures low on Tuesday and settled sharply lower. The outlook for warmer US temperatures, which will reduce nat-gas heating demand, is weighing on prices. On Tuesday, the Commodity Weather Group said forecasts shifted warmer, with above-normal temperatures expected across the western half of the US through the end of the month. Also, high US nat-gas production and warmer weather are expected to turn the current US nat-gas storage deficit into a surplus in the coming weeks.
US (lower-48) dry gas production on Tuesday was 113.3 bcf/day (+8.8% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 101.4 bcf/day (+14.2% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 19.8 bcf/day (+1.3% 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 last Thursday that US (lower-48) electricity output in the week ended February 14 fell -1.61% y/y to 83,348 GWh (gigawatt hours). However, US electricity output in the 52-week period ending February 14 rose +2.36% y/y to 4,314,431 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.
