Mild US Weather Weighs on Nat-Gas Prices

May Nymex natural gas (NGK26) on Friday closed down -0.022 (-0.82%).

Nat-gas prices tumbled to a fresh 7.5-month nearest-futures low on Friday and settled lower.  Forecasts for mild US spring weather that could potentially reduce nat-gas heating demand are weighing on prices.  On Friday, the Commodity Weather Group said forecasts show above-average temperatures across the eastern half of the US through April 19.  

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.

US (lower-48) dry gas production on Friday was 111.3 bcf/day (+3.9% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 68.3 bcf/day (-9.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 19.8 bcf/day (-0.2% w/w), according to BNEF.

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.

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 8, 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 Friday that the number of active US nat-gas drilling rigs in the week ending April 10 fell by -3 to 127, 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.