Nat-Gas Prices Soar Amid Colder US Weather Predictions

Natural Gas Futures Jump on Colder Weather Outlook

On Wednesday, February Nymex natural gas contracts (NGG26) climbed by 5.22%, closing with a gain of +0.175. The rally was fueled by updated long-range weather models predicting colder conditions across the Midwest and East Coast between January 17 and 21, which could drive up heating demand and prompt traders to cover short positions.

The Commodity Weather Group highlighted that the upcoming chillier temperatures are expected to impact major regions, potentially increasing natural gas consumption for heating.

Electricity Demand and Gas Production Trends

Supporting natural gas prices, the Edison Electric Institute reported that electricity generation in the contiguous US reached 82,732 GWh for the week ending January 3, marking a 6.7% increase from the previous year. Over the past 52 weeks, output rose by 3% to 4,306,606 GWh.

On the supply side, rising US natural gas production continues to weigh on prices. The Energy Information Administration (EIA) updated its 2025 production forecast to 107.74 billion cubic feet per day (bcf/day), slightly above its previous estimate. Current output remains near record levels, with active drilling rigs recently hitting a two-year peak.

Production, Demand, and Export Data

According to BloombergNEF, dry gas production in the lower 48 states reached 112.6 bcf/day on Wednesday, up 10.9% year-over-year. Meanwhile, demand in these states was 89.5 bcf/day, down 26.9% from the previous year. Net flows to US LNG export terminals were estimated at 18.4 bcf/day, a 7.7% week-over-week decrease.

Inventory and Storage Insights

Market expectations suggest that Thursday's EIA report will show a 109 bcf drawdown in weekly natural gas inventories.

The previous week's EIA data was bearish, revealing a 38 bcf decline in stocks for the week ending December 26—less than the anticipated 51 bcf drop and well below the five-year average of 120 bcf. As of December 26, inventories were 1.1% lower year-over-year but remained 1.7% above the five-year seasonal norm, indicating sufficient supply. In Europe, gas storage was 60% full as of January 4, compared to the five-year average of 73% for this period.

Drilling Activity Update

Baker Hughes reported that the number of active US natural gas drilling rigs fell by two to 125 for the week ending January 2, slightly below the 2.25-year high of 130 reached in late November. Over the past year, the rig count has rebounded from a 4.5-year low of 94 in September 2024.