February Nymex natural gas (NGG25) on Monday closed up sharply by +0.318 (+9.48%).

Feb nat-gas prices rallied sharply on Monday as US weather forecasts turned colder, which will boost heating demand for nat-gas.  Monday's 6-10 day US weather forecast from NOAA is colder than last Friday's, with below-normal temperatures expected across the majority of the eastern and southern US.  

Lower-48 state dry gas production Monday was 103.7 bcf/day (-3.2% y/y), according to BNEF.  Lower-48 state gas demand Monday was 118.7 bcf/day (+16.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 14.9 bcf/day (+4.2% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Thursday that total US (lower-48) electricity output in the week ended December 28 rose +6.25% y/y to 77,960 GWh (gigawatt hours), and US electricity output in the 52-week period ending December 28 rose +2.59% y/y to 4,181,671 GWh.

Last Friday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended December 27 fell -116 bcf, a smaller draw than expectations of -128, although more than the 5-year average draw for this time of year of -104 bcf.  As of December 27, nat-gas inventories were down -1.8% y/y and were +4.7% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 74% full as of December 28, below the 5-year seasonal average of 78% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending January 3 rose +1 to 103 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).