Nat-Gas Prices Fall Sharply as EIA Inventories Climb

April Nymex natural gas (NGJ25) on Thursday closed down -0.272 (-6.40%).

April nat-gas prices on Thursday fell sharply after weekly EIA supplies rose more than expected.  Also, warmer-than-normal weather is forecast across the US for the rest of this month, reducing heating demand for nat-gas.  The EIA reported Thursday that nat-gas inventories for the week ended March 14 rose +9 bcf, above expectations of +4 bcf and well above the five-year average for this time of year of a -31 bcf draw.  Also, commercial forecaster Maxar Technologies said Thursday that it expects above-normal temperatures from the western US to Texas for March 25-29.

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 Thursday was 105.9 bcf/day (+3.0 y/y), according to BNEF.  Lower-48 state gas demand Thursday was 82.0 bcf/day (-6.7% y/y), according to BNEF.  LNG net flows to US LNG export terminals Thursday were 15.5 bcf/day (+0.9% 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 Wednesday that total US (lower-48) electricity output in the week ended March 15 rose +2.6% y/y to 72,295 GWh (gigawatt hours), and US electricity output in the 52-week period ending March 15 rose +3.5% y/y to 4,239,259 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.

Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended March 14 rose +9 bcf, a larger build than expectations of +4 bcf and well above the 5-year average draw for this time of year for a -31 bcf draw.  As of March 14, nat-gas inventories were down -26.8% y/y and -10.0% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 34% full as of March 18, 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).