Nat-Gas Prices Climb on the Outlook for Cooler US Temps to Persist

April Nymex natural gas (NGJ25) on Wednesday closed up +0.195 (+4.81%).

April nat-gas on Wednesday added to Tuesday's gains on forecasts for cooler weather in the US to persist, which would boost heating demand for nat-gas.  Commercial forecaster Maxar Technologies said Wednesday that a high-pressure weather system from Canada is expected to lower temperatures to below-normal for the Midwest and East into early next month.  

Last Monday, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season.  BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.

Lower-48 state dry gas production Wednesday was 106.1 bcf/day (+4.5 y/y), according to BNEF.  Lower-48 state gas demand Wednesday was 74.7 bcf/day (-14.5% y/y), according to BNEF.  LNG net flows to US LNG export terminals Wednesday were 16.0 bcf/day (+16.6% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended March 8 rose +7.8% y/y to 77,360 GWh (gigawatt hours), and US electricity output in the 52-week period ending March 8 rose +3.35% y/y to 4,237,406 GWh.

In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects.  Bloomberg reported that the Trump administration is close to approving its first LNG export project, a Commonwealth LNG export facility in Louisiana.  Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.

The consensus is for Thursday's weekly EIA nat-gas inventories to climb by +4 bcf for the week ending March 14.

Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended March 7 fell -62 bcf, a larger draw than expectations of -50 bcf and a bigger draw than the 5-year average draw for this time of year of -56 bcf.  As of March 7, nat-gas inventories were down -27.0% y/y and -11.9% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 35% full as of March 17, versus the 5-year seasonal average of 46% 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 14 fell -1 to 100 rigs, modestly above the 3-1/2 year low of 94 rigs posted on September 6, 2024.  Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).