March Nymex natural gas (NGH26) on Wednesday closed higher by +0.154 (+4.65%).
March nat-gas prices moved sharply higher on Wednesday amid the outlook for colder US weather to persist and expectations of a record drawdown in weekly nat-gas inventories on Thursday. The Commodity Weather Group said Wednesday that very cold weather is expected in the Northeast through February 8, potentially boosting nat-gas heating demand.
Nat-gas prices also have support from expectations of a record drawdown in US storage supplies. The consensus is that Thursday's weekly EIA nat-gas inventories will fall by -379 bcf for the week ended January 30, well above the five-year average for this time of year of -190 bcf and the largest weekly withdrawal on record.
Natural gas prices surged to a 3-year high last Wednesday, driven by the massive storm that just crossed the US and the Arctic blast of cold weather. The cold weather 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 last week, or about 15% of total US natural gas production.
US (lower-48) dry gas production on Wednesday was 111.2 bcf/day (+5.6% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 115.6 bcf/day (+18.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 19.7 bcf/day (+10.3% w/w), according to BNEF.
Projections for lower US nat-gas production are supportive for prices. The EIA on January 13 cut its forecast for 2026 US dry nat-gas production to 107.4 bcf/day from last month's estimate of 109.11 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.
As a bullish factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended January 31 rose +21.4% y/y to 99,925 GWh (gigawatt hours), and US electricity output in the 52-week period ending January 31 rose +2.39% y/y to 4,303,577 GWh.
Last Thursday's weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended January 23 fell by -242 bcf, a larger draw than the market consensus of -238 bcf and the 5-year weekly average draw of -208 bcf. As of January 23, nat-gas inventories were up +9.8% y/y and were +5.3% above their 5-year seasonal average, signaling ample nat-gas supplies. As of February 2, gas storage in Europe was 40% full, compared to the 5-year seasonal average of 56% 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 January 30 rose by +3 to 125 rigs, modestly below the 2.25-year high of 130 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.
