May Nymex natural gas (NGK26) on Wednesday closed down -0.065 (-2.25%).

Nat-gas prices fell to a 5-week nearest-futures low on Wednesday as recent above-normal spring temperatures have reduced nat-gas heating demand and allowed storage levels to build.  The consensus is that Thursday's weekly EIA nat-gas inventories rose +38 bcf for the week ended March 27, well above the five-year average for the week of a -4 bcf draw.

Forecasts for above-average US temperatures that reduce heating demand are also weighing on nat-gas prices.  The Commodity Weather Group said Wednesday that above-average temperatures are expected across the eastern half of the US and the Gulf Coast through April 5.  

Nat-gas prices have some medium-term support on the outlook for tighter global LNG supplies.  On March 19, Qatar 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 Wednesday was 111.3 bcf/day (+4.7% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 72.0 bcf/day (-7.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 19.7 bcf/day (-0.9% 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 a January 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 28 rose +5.7% y/y to 76,162 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending March 28 rose +1.9% y/y to 4,321,501 GWh.

Last 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 28, 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 27 fell by -4 to 127, modestly 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.