Nat-Gas Prices Plunge as US Weather Forecasts Warm

Core Viewpoint - Natural gas prices have experienced significant volatility, with a sharp decline observed due to warmer weather forecasts, which may reduce heating demand in the U.S. [1] Group 1: Price Movements - January Nymex natural gas closed down sharply by -0.377, representing a -7.13% decrease [1] - Last Friday, natural gas prices had rallied to a nearly 3-year nearest-futures high due to below-normal late-autumn temperatures, which increased heating demand [2] Group 2: Production and Demand - U.S. dry gas production was reported at 113.1 billion cubic feet per day (bcf/day), marking an increase of +8.3% year-over-year [3] - Lower-48 state gas demand reached 114.7 bcf/day, reflecting a significant increase of +30.1% year-over-year [3] - Estimated LNG net flows to U.S. LNG export terminals were 18.0 bcf/day, up by +1.0% week-over-week [3] Group 3: Inventory and Supply Factors - The EIA reported a smaller-than-expected draw in natural gas inventories for the week ended November 28, with a decrease of -12 bcf compared to the market consensus of -18 bcf [6] - As of November 28, natural gas inventories were down -0.4% year-over-year and were +5.1% above the 5-year seasonal average, indicating sufficient supply [6] - European gas storage was reported to be 74% full, compared to the 5-year seasonal average of 84% for this time of year [6] Group 4: Drilling Activity - The number of active U.S. natural gas drilling rigs fell by -1 to 129, just below the 2.25-year high of 130 rigs [7] - Over the past year, the number of gas rigs has increased from a 4.5-year low of 94 rigs reported in September 2024 [7] Group 5: Electricity Output - U.S. electricity output in the week ended November 29 rose by +2.11% year-over-year to 76,459 GWh, supporting natural gas prices [4] - Electricity output over the 52-week period ending November 29 increased by +2.99% year-over-year to 4,289,746 GWh [4] Group 6: Future Production Forecasts - The EIA raised its forecast for 2025 U.S. natural gas production by +1.0% to 107.67 bcf/day from the previous estimate of 106.60 bcf/day [5] - Current U.S. natural gas production is near record highs, with active rigs recently reaching a 2-year high [5]