January Nymex natural gas (NGF26) on Thursday closed down sharply by -0.364 (-7.92%).
Jan nat-gas prices plunged to a 5-week low on Thursday and settled sharply lower. The outlook for warmer US weather, which will reduce nat-gas heating demand, is hammering prices. Forecaster Atmospheric G2 said Thursday that forecasts shifted warmer across the southern and eastern US for December 16-20, and the outlook has trended warmer for most of the US for December 21-25.
Nat-gas prices sold off on Thursday despite a larger-than-expected draw in weekly storage. The EIA reported Thursday that nat-gas inventories fell -177 bcf for the week ended December 5, a larger draw than expectations of -170 bcf.
Higher US nat-gas production is a bearish factor for prices. On Tuesday, the EIA raised its forecast for 2025 US nat-gas production to 107.74 bcf/day from its November estimate of 107.70 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.
Last Friday, nat-ga prices rallied to a nearly 3-year nearest-futures high as late-autumn temperatures have remained well below normal and are expected to persist in the near term, boosting heating demand and shrinking nat-gas storage levels.
US (lower-48) dry gas production on Thursday was 112.4 bcf/day (+8.3% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 112.3 bcf/day (+5.1% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Thursday were 18.0 bcf/day (-4.0% w/w), according to BNEF.
As a supportive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended December 6 rose +2.3% y/y to 85,330 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 6 rose +2.84% y/y to 4,291,665 GWh.
Thursday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended December 5 fell by -177 bcf, a larger draw than the market consensus of -170 bcf and than the 5-year weekly average of -89 bcf. As of December 5, nat-gas inventories were down unchanged y/y and were +2.8% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of December 9, gas storage in Europe was 72% full, compared to the 5-year seasonal average of 81% 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 December 5 fell by -1 to 129, just below the 2.25-year high of 130 rigs set on November 28. 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. For more information please view the Barchart Disclosure Policy here.
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