Nat-Gas Prices Rally with Global Gas Prices as Iran Attacks Curb Supplies

April Nymex natural gas (NGJ26) on Thursday closed up +0.101 (+3.30%).

Nat-gas prices settled sharply higher on Thursday, garnering carryover support from a surge in European nat-gas prices to a 3-year high.  European natural gas prices surged on Thursday after Qatar reported "extensive damage" at the world's largest natural gas export plant at Ras Laffan Industrial City.  Reuters reported that Iran's strikes damaged 17% of Ras Laffan's LNG export capacity, a damage that will take three to five years to repair.   Reduced exports from Middle Eastern nat-gas suppliers could boost demand for US nat-gas supplies.

Nat-gas prices fell back from their best level on Thursday after weekly EIA nat-gas inventories rose by +35 bcf for the week ended March 13, well above the five-year average for this time of year of a -29 bcf decline.  

A mixed weather forecast also limited the upside in nat-gas prices on Thursday.  Forecaster Atmospheric G2 said Thursday that above-average warmth is forecast across the western and southern US for March 24-28, although forecasts shifted colder for the eastern half of the country and warmer elsewhere for March 29-April 2.

Nat-gas prices surged to a 3-year high earlier this month due to the war in Iran.  On March 2, 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.  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 112.3 bcf/day (+5.2% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 83.4 bcf/day (+10.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 19.8 bcf/day (-0.6% 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 14 rose +4.1% y/y to 75,247 GWh (gigawatt hours).  Also, US electricity output in the 52-week period ending March 14 rose +1.7% y/y to 4,311,070 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended March 13 rose by +35 bcf, well above the 5-year weekly average draw of -29 bcf.  As of March 13, nat-gas inventories were up +10.3% y/y, the most in 1.75 years, and +2.6% below their 5-year seasonal average, signaling ample nat-gas supplies.  As of March 17, gas storage in Europe was 29% full, compared to the 5-year seasonal average of 41% 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 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.