Nat-Gas Prices Settle Sharply Higher as Feb Nymex Contract Expires

Core Insights - Natural gas prices have surged to a 3.25-year high, closing up by +7.28% on February Nymex contracts due to colder weather forecasts in the eastern US, which may increase heating demand and reduce inventories [1][2] Price Movements - Natural gas prices have increased by over +120% in the past week, driven by a significant storm and an Arctic cold front that disrupted production and increased heating demand [3] - The last trading day for the February Nymex natural gas futures contract saw funds covering short positions, contributing to the price rally [2] Supply and Demand Dynamics - Approximately 50 billion cubic feet of natural gas were offline due to freeze-ups from the cold weather, representing about 15% of total US production [3] - US dry gas production was reported at 102.8 billion cubic feet per day, showing a year-over-year decline of -1.2% [6] - Demand for natural gas in the lower-48 states increased to 133.0 billion cubic feet per day, reflecting a year-over-year rise of +34.2% [6] Inventory and Production Forecasts - Expectations of a significant drawdown in natural gas storage are supporting price increases, with a consensus forecast of a decline of -239 billion cubic feet in the week ending January 23, exceeding the five-year average decline of -208 billion cubic feet [4] - The EIA has revised its forecast for US dry natural gas production in 2026 down to 107.4 billion cubic feet per day from a previous estimate of 109.11 billion cubic feet per day, indicating a supportive environment for prices [5] Electricity Output - The Edison Electric Institute reported a year-over-year decrease of -6.3% in US electricity output for the week ending January 24, although the output for the past 52 weeks increased by +2.1% [7]