Nat-Gas Prices Surge as President Trump Pauses Reciprocal Tariffs

May Nymex natural gas (NGK25) on Wednesday closed up sharply by +0.351 (+10.13%).

May nat-gas prices on Wednesday rebounded from a 2-month low and rallied sharply after President Trump announced a 90-day pause on reciprocal tariff for 56 countries, which boosted risk sentiment and prompted short covering in nat-gas futures.  Another supportive factor for nat-gas prices was forecasts for cooler US weather, which will boost heating demand for nat-gas.  The Commodity Weather Group said Wednesday that forecasts shifted cooler from the Midwest to the eastern US for April 14-18.

Last month, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season.  BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.

Lower-48 state dry gas production Wednesday was 103.9  bcf/day (+3.1 y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 77.2 bcf/day (+11.5% y/y), according to BNEF.  LNG net flows to US LNG export terminals Wednesday were 16.6 bcf/day (+15.5% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total US (lower-48) electricity output in the week ended April 5 rose +4.05% y/y to 74,475 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 5 rose +3.64% y/y to 4,243,287 GWh.

In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects.  Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.

The consensus is that Thursday's weekly EIA nat-gas inventories will climb +62 bcf for the week ended April 4, well above the five-year average for the week of +17 bcf.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended March 28 rose +29 bcf, a larger build than expectations of +28 bcf and well above the 5-year average draw for this time of year for a -13 bcf draw.  As of March 28, nat-gas inventories were down -21.5% y/y and -4.3% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 35% full as of April 6, versus the 5-year seasonal average of 46% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending April 4 fell -7 to a 6-1/2 month low of 96 rigs, just above the 3-1/2 year low of 94 rigs posted on September 6, 2024.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).