Nat-Gas Prices Rebound on Technical Short Covering

January Nymex natural gas (NGF26) on Friday closed up by +0.076 (+1.94%).

Jan nat-gas prices recovered from a 7-week low on Friday and settled sharply higher after oversold conditions sparked technical short covering in nat-gas futures.  Since posting a 3-year high on December 5, nat-gas prices have been in freefall as warmer US weather has curbed heating demand and allowed nat-gas storage to rebuild.  

Nat-gas prices initially moved lower on Friday amid an outlook for above-normal US weather that could curb nat-gas heating demand.  Forecaster Atmospheric G2 said Friday that forecasts shifted warmer across most of the US for December 24-28, with above-normal temperatures expected to continue across much of the country for December 29-January 2.  

Higher US nat-gas production is also bearish for prices.  Last 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.

US (lower-48) dry gas production on Friday was 1123.9 bcf/day (+8.8% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 98.7 bcf/day (-1.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 17.6 bcf/day (-2.7% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last 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 slightly bearish for nat-gas prices, as nat-gas inventories for the week ended December 12 fell by -167 bcf, a smaller draw than the market consensus of -176 bcf but larger than the 5-year weekly average of -96 bcf.  As of December 12, nat-gas inventories were down -1.2% y/y and were +0.9% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of December 17, gas storage in Europe was 68% full, compared to the 5-year seasonal average of 78% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ending December 19 remained unchanged at 127, just 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.
 

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.