Natural Gas Prices Surge After Market Recovery and Weather Forecasts

On Wednesday, May Nymex natural gas (NGK25) prices rose significantly by +0.351 (+10.13%). This surge followed a rebound from a two-month low. The rally was sparked by President Trump’s announcement of a 90-day delay on reciprocal tariffs for 56 countries, which improved risk sentiment and led to short covering in natural gas futures. Additionally, forecasts for cooler weather across parts of the U.S. increased the outlook for heating demand.

Weather and Market Influence on Prices

The Commodity Weather Group reported that weather predictions shifted cooler across the Midwest and eastern U.S. for the period of April 14-18, further supporting natural gas prices. Last month, natural gas reached a two-year high due to concerns about tight U.S. storage levels ahead of the summer air conditioning season. BloombergNEF forecasts that U.S. gas storage will remain 10% below the five-year average during this upcoming summer.

Production and Demand Stats

As of Wednesday, dry gas production in the lower 48 states was recorded at 103.9 billion cubic feet per day (bcf/day), up 3.1% year-over-year, according to BNEF. Meanwhile, the demand for gas in these states increased to 77.2 bcf/day, reflecting an 11.5% year-over-year rise. Furthermore, liquefied natural gas (LNG) net flows to U.S. export terminals reached 16.6 bcf/day, which marked a significant 15.5% week-over-week increase.

Electricity Output and Future Prospects

Improving electricity generation aligns with rising natural gas demand from utility companies. The Edison Electric Institute announced that total electricity output in the U.S. (lower 48 states) for the week ending April 5 rose by 4.05% year-over-year to 74,475 GWh, and total output over the past 52 weeks grew 3.64% to 4,243,287 GWh.

Future Natural Gas Export Capacity

A long-term positive factor for natural gas appears to be President Trump’s decision to lift the Biden administration’s hold on approving new gas export projects. This move clears the way for active consideration of nearly a dozen LNG export projects, which could significantly enhance U.S. natural gas demand and assist in stabilizing prices.

EIA Inventory Expectations

Consensus estimates suggest that Thursday’s weekly EIA natural gas inventory report will reflect an increase of +62 bcf for the week ending April 4, surpassing the five-year average of +17 bcf for this time frame. The EIA report from the previous Thursday indicated inventory levels that rose by +29 bcf, exceeding expectations and overshadowing a typical seasonal draw of -13 bcf. As of late March, natural gas inventories were down 21.5% year-over-year and 4.3% below their five-year seasonal average, highlighting ongoing supply constraints. In comparison, European gas storage was reported to be 35% full as of April 6, below the five-year average of 46%.

Drilling Activity Update

According to Baker Hughes, the count of active natural gas drilling rigs in the U.S. decreased by seven to a six-and-a-half-month low of 96 rigs as of April 4. This figure stands just above the three-and-a-half-year low of 94 rigs reached on September 6, 2024. Since hitting a five-and-a-quarter year high of 166 rigs in September 2022, the number of active rigs has seen a decline from the record low of 68 rigs recorded in July 2020, based on data available since 1987.

On the date of publication,

Rich Asplund

did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes. For additional information, please view the Barchart Disclosure Policy.

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