Above-Normal US Temps Undercut Nat-Gas Prices

Core Insights - Natural gas prices have declined for three consecutive sessions, reaching a four-week low due to forecasts of above-average temperatures in the US, which are expected to reduce heating demand [1] - The EIA has raised its forecast for US dry natural gas production in 2026 to 109.97 billion cubic feet per day (bcf/day), contributing to bearish sentiment in the market [2] - Recent weather events, including a significant storm in January, previously caused natural gas prices to surge to a three-year high due to production disruptions and increased heating demand [3] Production and Demand - US dry gas production is currently at 112.8 bcf/day, reflecting a year-over-year increase of 6.8%, while demand has decreased to 94.9 bcf/day, down 11.2% year-over-year [4] - Estimated LNG net flows to US export terminals have increased to 19.5 bcf/day, showing a week-over-week rise of 2.6% [4] Inventory and Supply - The latest EIA report indicated a record draw of -360 billion cubic feet from natural gas inventories, which, although smaller than market expectations, is significantly above the five-year average draw [6] - As of January 30, natural gas inventories were up 2.8% year-over-year but 1.1% below the five-year seasonal average, indicating tighter supply conditions [6] - European gas storage levels are currently at 37% full, compared to a five-year seasonal average of 54% for this time of year [6] Electricity Output - The Edison Electric Institute reported a year-over-year increase of 21.4% in US electricity output for the week ending January 31, which may support natural gas prices [5] - Over the past 52 weeks, US electricity output has risen by 2.39% year-over-year [5]