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.
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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