Nat-Gas Prices Jump as Iran War May Boost US LNG Exports

April Nymex natural gas (NGJ26) on Monday closed up by +0.101 (+3.53%).

April nat-gas prices settled sharply higher on Monday on the outlook for increased demand for US nat-gas supplies.  Qatar shut its Ras Laffan plant, the world's largest natural gas export facility, after it was targeted by an Iranian drone attack.   The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and its closure could boost US nat-gas exports.   Nat-gas prices also had carryover support from Monday's +39% surge in European nat-gas prices to a 1-year high.

Nat-gas prices fell from their best levels on Monday as forecasts for warmer US temperatures should temper nat-gas heating demand.  The Commodity Weather Group said Monday that above-average temperatures are expected across the US from March 7-11.  

US (lower-48) dry gas production on Monday was 110.2 bcf/day (+2.6% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 93.1 bcf/day (-2.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 19.5 bcf/day (-2.1% w/w), according to BNEF.

Projections for higher US nat-gas production are bearish for prices.  On February 17, the EIA raised its forecast for 2026 US dry nat-gas production to 109.97 bcf/day from last month's estimate of 108.82 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high last Friday.

Natural gas prices surged to a 3-year high on January 28, driven by the massive storm that disrupted the US with Arctic cold weather.  The well below normal temperatures caused freeze-ups in gas wells, disrupted production in Texas and elsewhere, and drove a spike in demand for natural gas for heating.   About 50 billion cubic feet of natural gas came offline, or about 15% of total US natural gas production, due to freeze-ups.

As a negative factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended February 21 fell -13.46% y/y to 78,464 GWh (gigawatt hours).  However, US electricity output in the 52-week period ending February 21 rose +1.7% y/y to 4,302,222 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended February 20 fell by -52 bcf, a slightly larger draw than the market consensus of -50 bcf but well below the 5-year weekly average draw of -168 bcf.  As of February 20, nat-gas inventories were up +9.7% y/y and -0.3% below their 5-year seasonal average, signaling near-normal nat-gas supplies.  As of February 24, gas storage in Europe was 30% full, compared to the 5-year seasonal average of 47% 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 February 27 rose by 1 to a 2.5-year high of 134 rigs.  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.