Nat-Gas Prices Slammed by Above-Normal Spring Temps

May Nymex natural gas (NGK25) on Monday closed down by -0.202 (-5.73%).

May nat-gas prices settled sharply lower on Monday due to revised warmer US weather forecasts, which will curb heating demand for nat-gas.  On Monday, the Commodity Weather Group said that forecasts shifted warmer for the eastern half of the US and will remain above normal for Texas for April 19-23.

Last month, 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 Monday was 106.7  bcf/day (+5.7 y/y), according to BNEF.  Lower-48 state gas demand Monday was 69.4 bcf/day (+3.2% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 16.2 bcf/day (+2.2% 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 April 5 rose +4.05% y/y to 74,475 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 5 rose +3.64% y/y to 4,243,287 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.  Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.

Last Thursday's weekly EIA report was slightly bearish for nat-gas prices since nat-gas inventories for the week ended April 4 rose +57 bcf, close to expectations of +58 bcf and well above the 5-year average draw for this time of year for a +17 bcf build.  As of April 4, nat-gas inventories were down -19.8% y/y and -2.1% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 35% full as of April 12, 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 April 11 rose +1 to 97 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).

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.