April Natural Gas Prices Rise Amid Mixed Weather Forecast

April Nymex natural gas (NGJ25) closed Friday with an increase of +0.097 (+2.253%).

On the same day, natural gas prices recovered from early losses and displayed slight gains, influenced by a mixed weather outlook in the United States. Short covering played a role in the price increase after NOAA reported that the forecast for March 17-21 shows cooler temperatures on the West Coast, while storm systems may moderate warmer conditions on the East Coast.

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The upcoming implementation of a 10% tariff on Canadian natural gas imports, starting Tuesday, is expected to exert upward pressure on U.S. natural gas prices as U.S. importers will bear the cost of these tariffs. Additionally, the Canadian province of Ontario has indicated it may impose a 25% export tariff on electricity sent to approximately 1.5 million homes in Minnesota, Michigan, and New York, should U.S. tariffs remain in effect. This action would likely increase demand for domestically generated electricity from natural gas.

Natural gas prices surged to a two-year high on Tuesday. They have experienced volatility over the past week, primarily due to weather-related factors, while remaining near the peak of a February rally driven by a significant inventory drawdown resulting from recent cold weather. As of February 28, EIA natural gas inventories were reported to be -11.3% below their five-year average, indicating some of the tightest supplies seen in over two and a half years.

According to BNEF, lower-48 state dry gas production was reported at 106.7 bcf/day (+3.9 y/y) on Friday. Meanwhile, lower-48 state gas demand reached 88.8 bcf/day (+10.6% y/y) on the same day. For LNG, net flows to U.S. export terminals remained stable at 15.2 bcf/day week-over-week, as stated by BNEF.

An increase in U.S. electricity output will likely bolster natural gas demand from utility providers. The Edison Electric Institute announced on Wednesday that total U.S. electricity output in the week ending March 1 rose by +2.15% year-over-year to 76,865 GWh (gigawatt hours). In the 52-week period concluding March 1, U.S. electricity output also rose by +3.16% year-over-year, totaling 4,231,788 GWh.

In a positive long-term factor for natural gas prices, President Trump lifted the Biden administration’s pause on approving gas export projects in January. This shift means that a backlog of approximately a dozen LNG export projects is now under active consideration. Bloomberg reported that the Trump administration is nearing approval for its first LNG export project, a Commonwealth LNG facility in Louisiana. Increased capacity for LNG exports would likely elevate demand for U.S. natural gas and support its prices.

However, Thursday’s weekly EIA report presented a bearish outlook for natural gas prices, as inventories for the week ended February 28 fell by -80 bcf. This draw was less than the expected -93 bcf and below the five-year average draw of -94 bcf for this time of year. As of February 28, inventories were down -24.6% year-over-year and -11.3% below their five-year seasonal average, illustrating tight supplies. For context, European gas storage was reported to be 37% full as of March 4, compared to a five-year average of 49% for this time of year.

Baker Hughes reported on Friday that the number of active U.S. natural gas drilling rigs decreased by -1 to 101 rigs in the week ending March 7. This level remains modestly above the three-and-a-half-year low of 94 rigs recorded on September 6, 2024. Active rig counts have declined from a five-and-a-quarter-year high of 166 rigs in September 2022, following a pandemic-era record low of 68 rigs noted in July 2020 (data available 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 are intended solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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