Nat-Gas Prices Climb as Weekly EIA Inventories Fall More Than Expected

April Nymex natural gas (NGJ26) on Thursday closed up +0.047 (+1.59%).

Nat-gas prices settled higher on Thursday after weekly US gas storage levels fell more than expected.  The EIA reported on Thursday that nat-gas inventories fell -54 bcf in the week ended March 20, a steeper decline than expectations of -48 bcf.  

However, gains in nat-gas were limited on Thursday amid warming US weather forecasts, potentially reducing nat-gas heating demand.  On Thursday, the Commodity Weather Group said forecasts are trending warmer, with above-average temperatures expected across most of the US through April 3.

Nat-gas prices also have medium-term support 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 Thursday was 113.2 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 72.5 bcf/day (-11.4% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 20.1 bcf/day (+2.4% 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 Wednesday that US (lower-48) electricity output in the week ended March 21 rose +7.5% y/y to 77,717 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending March 21 rose +1.8% y/y to 4,317,398 GWh.

The consensus is that Thursday's weekly EIA nat-gas inventories will decline by -49 bcf in the week ended March 20, a larger draw than the five-year average for the week of -21 bcf.

Thursday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended March 20 fell by -54 bcf, a larger draw than expectations of -48 bcf and the 5-year weekly average draw of -21 bcf.  As of March 20, nat-gas inventories were up +4.9% y/y, and +0.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of March 24, gas storage in Europe was 28% 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, 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.