The selling pressure started early in the week when sellers took out the previous main bottom at $3.467. On Friday, it accelerated through a multi-month low at $3.252. The catalyst for the end-of-week weakness was a NatGasWeather report calling for warming across most of the U.S. for January 9-15, with temperatures shifting even warmer across most of the country for January 16-23.
Supply Surge Meets Weak Demand
On the supply side, U.S. natural gas production is currently near a record high, with active U.S. natural gas rigs recently posting a 2-year high.
Additionally, gas production ended the week at 113.5 bcf/day, up 10.7% year-over-year. On the flip side, gas demand was 87.9 bcf/day, down 28.1% year-over-year. Meanwhile, LNG net flows to U.S. LNG export terminals on Friday were 19.5 bcf/day (+0.1% w/w), according to Bloomberg.
Storage Data Shows Larger-Than-Expected Draw
Last Thursday’s weekly Energy Information Administration (EIA) storage report was bullish as natural gas inventories for the week ended January 2 fell by 119 bcf, a larger draw than the market consensus of -109 bcf, and much larger than the 5-year weekly average draw of -92 bcf.
As of January 6, gas storage in Europe was 58% full, compared to the 5-year seasonal average of 72% full for this time of year.
Rig Count Edges Lower from Recent Peak
Finally, Baker Hughes reported Friday that the number of active U.S. natural gas drilling rigs in the week ending January 9 fell by -1 to 124 rigs, modestly below the 2.25-year high of 130 set on November 28. In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.