US Weather Shifts: How It's Shaking Up Natural Gas Prices

The US is bracing for a chill, and it's sending ripples through the natural gas market. Prices are on the rise as forecasters predict a colder-than-expected stretch ahead. The eastern two-thirds of the country is expected to feel the freeze from January 18th to the 22nd, with even colder temperatures hitting the Rockies, Northwest, and Midwest from the 23rd to the 27th. This weather shift is a big deal because natural gas is a go-to fuel for heating. More demand means higher prices. But it's not just about the cold. The Energy Information Administration (EIA) recently lowered its forecast for US natural gas production in 2026. They're now expecting around 107. 4 billion cubic feet per day, down from the previous estimate of 109. 11 billion. Despite this, production is still near record highs, with gas rigs hitting a two-year peak. Last Friday, prices took a dive, hitting a 2. 5-month low. Why? Because warmer weather was in the forecast, and that meant less demand for heating. But now, with colder days ahead, the story has changed.Let's talk numbers. On Tuesday, US dry gas production was around 113. 3 billion cubic feet per day, up 8. 4% from last year. Demand was at 94. 9 billion cubic feet per day, down 18. 6% from last year. Liquefied Natural Gas (LNG) net flows to export terminals were up 12. 4% week over week. Electricity output is another piece of the puzzle. The Edison Electric Institute reported a 6. 7% year-over-year increase in the week ending January 3rd. Over the past year, electricity output rose 3. 0% year-over-year. The EIA's weekly report was a bullish sign for natural gas prices. Inventories dropped by 119 billion cubic feet for the week ending January 2nd, much more than expected. As of January 2nd, inventories were down 3. 5% year-over-year but still 1. 0% above the 5-year average. Across the pond, Europe's gas storage is at 55% full, compared to the 5-year average of 70% for this time of year. Baker Hughes reported that the number of active US natural gas drilling rigs fell by 1 last week, bringing the total to 124. This is slightly below the 2. 25-year high of 130 rigs set in late November. Over the past year, the number of gas rigs has risen from a 4. 5-year low of 94.