Nat-Gas Prices Retreat on Abundant US Supplies

May Nymex natural gas (NGK26) on Thursday closed down -0.054 (-1.98%).

Nat-gas prices added to this week's losses on Thursday, falling to a 7.5-month nearest-futures low.  A larger-than-expected build in weekly nat-gas storage levels weighed on prices on Thursday.  The EIA reported that nat-gas inventories rose by +50 bcf the week ended April 3, above expectations of +48 bcf.  

Nat-gas prices extended their decline on Thursday amid forecasts for above-normal US spring temperatures, potentially reducing nat-gas heating demand.  The Commodity Weather Group on Thursday said forecasts shifted warmer, with above-average temperatures expected across the eastern two-thirds of the US through April 23.

Nat-gas prices have some medium-term support on the outlook for tighter global LNG supplies.  On March 19, Qatar reported "extensive damage" at the world's largest natural gas export plant at Ras Laffan Industrial City.   Qatar said the attacks by Iran damaged 17% of Ras Laffan's LNG export capacity,  a damage that will take three to five years to repair.   The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports.  Also, the closure of the Strait of Hormuz due to the war in Iran has sharply curtailed nat-gas supplies to Europe and Asia.

US (lower-48) dry gas production on Thursday was 110.9 bcf/day (+4.3% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 70.4 bcf/day (-9.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 20.0 bcf/day (+0.5% w/w), according to BNEF.

Projections for higher US nat-gas production are bearish for prices.  On Tuesday, the EIA raised its forecast for 2026 US dry nat-gas production to 109.59 bcf/day from a March estimate of 109.49 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high in late February.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended April 4 rose +2.3% y/y to 76,196 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending April 4 rose +1.88% y/y to 4,323,222 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended April 3 rose by +50 bcf, above expectations of +48 bcf and well above the 5-year weekly average of +13 bcf.  As of April 3, nat-gas inventories were up +4.4% y/y, and +4.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of April 7, gas storage in Europe was 29% full, compared to the 5-year seasonal average of 42% full for this time of year.

Baker Hughes reported last Thursday that the number of active US nat-gas drilling rigs in the week ending April 3 rose by +3 to 130, modestly below the 2.5-year high of 134 rigs from February 27.  In the past 17 months, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.