March Nymex natural gas (NGH26) on Wednesday closed up by +0.054 (+1.85%).
March nat-gas prices recovered from a 4.25-month nearest-futures low on Wednesday and settled higher. Short-covering emerged in nat-gas futures on Wednesday after longer-term weather forecasts called for below-normal temperatures next month, potentially boosting nat-gas heating demand. On Wednesday, EBW Analytics Group said the probability increased for a "polar vortex" weather pattern dropping into the lower 48 US states in the middle of next month.
Nat-gas prices initially moved lower Wednesday after the Commodity Weather Group said forecasts shifted warmer, with above-normal temperatures expected across much of the US through the first week of March, potentially reducing nat-gas heating demand. Also, expectations for a smaller-than-average draw in weekly US nat-gas storage are bearish for prices. The consensus is that Thursday's weekly EIA nat-gas inventories fell by -49 bcf for the week ended February 20, a much smaller draw than the five-year average for the week of -168 bcf.
US (lower-48) dry gas production on Wednesday was 112.3 bcf/day (+7.1% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 93.1 bcf/day (+14.6% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 19.5 bcf/day (unchanged 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 negative factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended February 21 fell -13.46% y/y to 78,464 GWh (gigawatt hours). However, US electricity output in the 52-week period ending February 21 rose +1.7% y/y to 4,302,222 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended February 13 fell by -144 bcf, a smaller draw than the market consensus of -149 bcf and the 5-year weekly average draw of -151 bcf. As of February 13, nat-gas inventories were down -1.5% y/y and -5.6% below their 5-year seasonal average, signaling tight nat-gas supplies. As of February 22, gas storage in Europe was 31% full, compared to the 5-year seasonal average of 47% 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 20 was unchanged at 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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