Warm US Weather Knocks Nat-Gas Prices Sharply Lower

April Nymex natural gas (NGJ26) on Monday closed down -0.204 (-6.59%).

Nat-gas prices tumbled to a 3-week low on Monday and settled sharply lower.  The outlook for warmer US weather, which will reduce nat-gas heating demand, is weighing on prices.  The Commodity Weather Group on Monday said forecasts shifted warmer, with above-average temperatures expected across the western two-thirds of the US through April 1.  

Nat-gas prices were also pressured Monday on some negative carryover from a -10% plunge in WTI crude oil prices.

Further downside in nat-gas prices may be limited in the near term after Qatar last Thursday 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.

US (lower-48) dry gas production on Monday was 112.4 bcf/day (+4.3% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 81.5 bcf/day (+7.4% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 19.9 bcf/day (-1.8% 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 in late February.

As a positive factor for gas prices, the Edison Electric Institute reported last 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.

Last 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 20 fell by -2 to 131 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.