March Nymex natural gas (NGH25) on Thursday erased an early rally and closed down by -0.128 (-2.99%).
March nat-gas fell from a 2-year high Thursday and closed moderately lower after warmer US weather forecasts sparked long liquidation in nat-gas -futures. Forecaster Maxar Technologies said on Thursday that forecasts moved warmer for parts of the central US from February 25 to March 1, which will reduce heating demand for nat-gas. Thursday’s nat-gas prices initially rallied to a 2-year high as a cold snap and storms moved through the US. Also, Thursday’s weekly EIA inventory report showed nat-gas inventories fell -196 bcf, a larger draw than expectations of -193 bcf.
Tightness in nat-gas supplies is supporting the recent rally in nat-gas prices. As of February 14, EIA nat-gas inventories were -5.3% below their 5-year average, the tightest supplies have been in over two years.
In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects. Bloomberg reported that the Trump administration is close to approving its first LNG export project, a Commonwealth LNG export facility in Louisiana. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.
Lower-48 state dry gas production Thursday was 101.1 bcf/day (-3.9% y/y), according to BNEF. Lower-48 state gas demand Thursday was 129.8 bcf/day (+39.3% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 15.3 bcf/day (+0.4% w/w), according to BNEF.
An increase in US electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total US (lower-48) electricity output in the week ended February 15 rose +10.9% y/y to 84,714 GWh (gigawatt hours), and US electricity output in the 52-week period ending February 15 rose +2.8% y/y to 4,215,106 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended February 14 fell -196 bcf, a larger draw than expectations of -193 bcf and a larger draw than the 5-year average draw for this time of year of -145 bcf. As of February 14, nat-gas inventories were down -14.9% y/y and -5.3% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 43% full as of February 18, versus the 5-year seasonal average of 53% 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 14 rose +1 to 101 rigs, modestly above the 3-1/2 year low of 94 rigs posted on September 6, 2024. Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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