May Nymex natural gas (NGK26) on Wednesday closed down -0.146 (-5.09%).
Nat-gas prices tumbled to a 7.5-month nearest-futures low on Wednesday and settled sharply lower. Above-normal US weather forecasts that reduce nat-gas heating demand are weighing on nat-gas prices. The Commodity Weather Group said that above-average temperatures are expected across the eastern half of the US over the next two weeks. Nat-gas prices extended their losses on Wednesday in sympathy with the -15% plunge in crude oil prices after the US and Iran agreed to a ceasefire.
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 111.0 bcf/day (+3.8% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 73.6 bcf/day (-13.5% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 20.1 bcf/day (+1.0% w/w), according to BNEF.
Projections for higher US nat-gas production are bearish for prices. On Tuesday, the EIA raised its forecast for 2026 US dry nat-gas production to 109.59 bcf/day from a March estimate of 109.49 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 April 4 rose +2.3% y/y to 76,196 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending April 4 rose +1.88% y/y to 4,323,222 GWh.
The consensus is that Thursday's weekly EIA nat-gas inventories will increase by +48 bcf.
Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended March 27 rose by +36 bcf, right on expectations but well above the 5-year weekly average draw of -4 bcf. As of March 27, nat-gas inventories were up +5.2% y/y, and +3.0% above their 5-year seasonal average, signaling ample nat-gas supplies. As of April 6, 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 last Thursday that the number of active US nat-gas drilling rigs in the week ending April 3 rose by +3 to 130, 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.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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