March Nymex natural gas (NGH24) on Friday closed -0.070 (-3.65%).

Nat-gas prices on Friday extended their month-long decline and posted a 3-1/3 year nearest-futures low as above-normal temperatures this winter continue to hammer nat-gas prices.  Updated U.S. weather forecasts turned warmer than previously expected, reducing heating demand for nat-gas and keeping U.S. nat-gas inventories elevated.  On Friday, the Commodity Weather Group said forecasts have shifted warmer for the East Coast and much of the southern U.S. from Feb 19-23.  

Nat-gas prices are also under pressure after the Freeport LNG nat-gas export terminal in Texas said on January 26 that it shut down one of its three production units for a month for repairs after extreme cold in Texas damaged equipment.  The closure of one of the units will limit U.S. nat-gas exports and increase U.S. nat-gas inventories.

Lower-48 state dry gas production Friday was 104.8 bcf/day (+4.6% y/y), according to BNEF.  Lower-48 state gas demand Friday was 83.1 bcf/day (-0.4% y/y), according to BNEF.  LNG net flows to U.S. LNG export terminals Friday were 14.0 bcf/day (+1.9% w/w), according to BNEF.

The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices.  AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America.

A decline in U.S. electricity output is negative for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total U.S. electricity output in the week ended February 3 fell -8.1% y/y to 77,013 GWh (gigawatt hours), and cumulative U.S. electricity output in the 52-week period ending February 3 fell -0.4% y/y to 4,099,080 GWh.

Thursday's weekly EIA report was neutral to slightly bearish for nat-gas prices as nat-gas inventories for the week ended February 2 fell -75 bcf, right on expectations but a much smaller draw than the five-year average for this time of year at -193 bcf.  As of February 2, nat-gas inventories were up +9.2% y/y and were +10.6% above their 5-year seasonal average, signaling ample nat-gas supplies.  In Europe, gas storage was 68% full as of February 6, above the 5-year seasonal average of 54% full for this time of year.

Baker Hughes reported Friday that the number of active U.S. nat-gas drilling rigs in the week ending February 9 rose +4 rigs to a 5-month high of 121 rigs, moderately above the 2-year low of 113 rigs posted September 8.  Active rigs have fallen back since climbing to a 4-1/2 year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).

• Nat-Gas Prices Slump to 3-Year Low on Ample U.S. Supplies
• Nat-Gas Prices Weaken Further on Warm U.S. Temps
• Nat-Gas Prices Tumble as Warm U.S. Winter Temps Persist
• Nat-Gas Prices Little Changed as Warm U.S. Winter Temps Still Dominate