Nat-Gas Prices Soar as Forecasts for Below Normal US Temperatures

NG=F +6.41%

January Nymex natural gas (NGF26) on Friday closed up by +0.292 (+6.41%).

Jan nat-gas prices rallied sharply on Friday, surging to an 8.5-month nearest-futures high on expectations of colder US weather, potentially boosting heating demand for nat-gas.   The Commodity Weather Group on Friday said weather models shifted cooler in the US, with intense cold seen in the Northeast and Great Lakes region for December 3-7.  Also, forecasts indicate below-normal temperatures in the coming weeks for the Northeast and the Great Lakes.

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Higher US nat-gas production is a bearish factor for prices.  On November 12, the EIA raised its forecast for 2025 US nat-gas production by +1.0% to 107.67 bcf/day from September's estimate of 106.60 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 Friday was a record 113.4 bcf/day (+8.3% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 98.6 bcf/day (+9.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 18.5 bcf/day (+4.4% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended November 15 rose +5.33% y/y to 75,586 GWh (gigawatt hours), and US electricity output in the 52-week period ending November 15 rose +2.9% y/y to 4,286,124 GWh.

Wednesday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended November 21 fell by -11 bcf, a larger draw than the market consensus of -9 bcf but less than the 5-year weekly average of a -25 bcf draw.  As of November 21, nat-gas inventories were down -0.8% y/y and were +4.2% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of November 26, gas storage in Europe was 77% full, compared to the 5-year seasonal average of 88% full for this time of year.

Baker Hughes reported Wednesday that the number of active US nat-gas drilling rigs in the week ending November 28 rose by +3 to 130 rigs, a 2.25-year high.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.

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. This article was originally published on Barchart.com