May Natural Gas Prices Decline Amid Concerns Over Trade Tariffs

May Nymex natural gas (NGK25) closed lower on Friday, down by -0.030 (-0.84%).

Trade Tariffs Weigh on Prices

Natural gas prices saw moderate losses due to fears that escalating trade tariffs between the U.S. and China will disrupt global trade and diminish demand for U.S. natural gas supplies. On Friday, China responded to U.S. tariff increases by raising tariffs on all U.S. goods to 125% from 84%.

Weather Forecast Impact

A mixed weather forecast in the U.S. is also limiting heating demand for natural gas, thereby applying downward pressure on prices. According to the Commodity Weather Group, temperatures in the western U.S. are expected to shift to above normal, while the Midwest and East will see more seasonal temperatures from April 16-20.

Current Supply and Demand Dynamics

Last month, natural gas prices reached a two-year high, driven by indications that U.S. natural gas storage levels could remain tight ahead of the summer air-conditioning season. BloombergNEF anticipates that U.S. gas storage will be 10% below the five-year average this summer.

As of Friday, dry gas production in the lower-48 states was reported at 106.2 bcf/day, showing a year-over-year increase of 4.7%. Meanwhile, gas demand stood at 76.7 bcf/day, reflecting an 11.4% increase year-over-year. Additionally, LNG net flows to U.S. export terminals reached 16.3 bcf/day, a 9.1% week-over-week increase.

Electricity Output Boosts Demand

In a positive trend for natural gas demand, U.S. electricity output has risen. The Edison Electric Institute noted that total electricity generation in the lower-48 states increased by 4.05% year-over-year to 74,475 GWh for the week ending April 5. Electricity output over the 52-week period ending April 5 rose 3.64% year-over-year to 4,243,287 GWh.

Long-term Outlook for Natural Gas Prices

A bullish factor for natural gas prices has emerged as President Trump lifted the Biden administration’s pause on LNG export project approvals earlier this year. This decision paves the way for several pending LNG export projects, which could significantly enhance U.S. natural gas demand and stabilize prices.

Inventory Levels and Rig Count

According to Thursday’s weekly EIA report, natural gas inventories rose by 57 bcf for the week ending April 4, slightly below expectations of 58 bcf but significantly above the five-year average of a 17 bcf build for this time of year. As of April 4, inventories were down 19.8% year-over-year and 2.1% below the five-year seasonal average, indicating tight supplies. In Europe, gas storage levels were reported at 35% full as of April 7, compared to the five-year average of 46% full.

Baker Hughes reported an increase of one active U.S. natural gas drilling rig in the week ending April 11, bringing the total to 97 rigs. This number remains slightly above the 3.5-year low of 94 rigs reached on September 6, 2024. Since hitting a 5.25-year high of 166 rigs in September 2022, active rig counts have declined from the pandemic-era low of 68 rigs in July 2020, with historical data spanning back to 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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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