Nat-Gas Sink on Above-Normal US Weather Forecasts

April Nymex natural gas (NGJ26) on Friday closed down -0.102 (-3.15%).

Nat-gas prices on Friday gave up an early advance and settled sharply lower on forecasts for above-normal US weather, potentially curbing heating demand for nat-gas.  Forecaster Atmospheric G2 said Friday that forecasts shifted warmer with widespread above-average temperatures in the western two-thirds of the US for March 18-22.  

Nat-gas prices surged last week, with European nat-gas prices climbing to a 3-year high last Tuesday due to the war in Iran.  Last Monday, 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. 

US (lower-48) dry gas production on Friday was 113.1 bcf/day (+5.2% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 81.7 bcf/day (+5.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 20.2 bcf/day (+4.5% 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.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended March 7 rose +1.00% y/y to 78,133 GWh (gigawatt hours).  Also, US electricity output in the 52-week period ending March 7 rose +1.69% y/y to 4,309,018 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended March 6 fell by -38 bcf, a smaller draw than the market consensus of -41 bcf and the 5-year weekly average draw of -64 bcf.  As of March 6, nat-gas inventories were up +8.8% y/y and -0.9% below their 5-year seasonal average, signaling near-normal nat-gas supplies.  As of March 11, 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 March 13 rose by +1 to 133 rigs, just 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.