February Nymex natural gas futures closed up 7.57% on Monday, gaining 0.240 points. The sharp rally was driven by forecasts for colder weather across the eastern half of the United States from January 17 to 21, which could increase heating demand. Forecaster Atmospheric G2 noted the shift on Monday, adding that the outlook also trended colder for the northern half of the country from January 22 to 26.
This price increase follows a decline last Friday, when natural gas prices sank to a 2.5-month low. That drop came after forecasts predicted warmer temperatures, which suggested reduced heating demand and allowed storage levels to rebuild.
Higher US natural gas production continues to exert downward pressure on prices. The Energy Information Administration raised its 2025 production forecast slightly on December 9. US production remains near a record high, with active drilling rigs recently hitting a two-year peak.
Data from BNEF on Monday showed lower-48 state dry gas production at 113.8 billion cubic feet per day, an 8.8% year-over-year increase. Demand in the same region was 101.1 bcf/day, down 6.1% from a year ago. Estimated LNG net flows to US export terminals were 20.1 bcf/day, up 3.0% week-over-week.
A supportive factor emerged last Wednesday when the Edison Electric Institute reported that US electricity output rose 6.7% year-over-year for the week ended January 3. Output for the 52-week period ending that date increased 3.0%.
The weekly EIA report last Thursday showed a larger-than-expected drawdown in natural gas inventories. For the week ended January 2, inventories fell by 119 billion cubic feet, exceeding the market consensus of a 13 bcf draw and the five-year average weekly draw of 92 bcf. As of January 2, inventories were down 3.5% year-over-year but remained 1.0% above their five-year seasonal average, indicating ample supplies. In Europe, gas storage was 55% full as of January 10, below the five-year seasonal average of 70% for this time of year.
Baker Hughes reported last Friday that the number of active US natural gas drilling rigs fell by one to 124 in the week ending January 9. This figure is modestly below the 2.25-year high of 130 set on November 28. Over the past year, the rig count has risen from a 4.5-year low of 94 reported in September 2024.