April Natural Gas Prices Rise on Heating Demand Outlook

April Nymex natural gas (NGJ25) closed Thursday at +0.027 (+0.66%). Prices rebounded after hitting a 1-1/2 week low, supported by a larger-than-expected decline in weekly EIA natural gas inventories. The EIA reported a draw of -62 bcf for the week ending March 7, surpassing analysts’ expectations of -50 bcf. However, nat-gas prices initially dipped due to forecasts predicting warmer weather in the eastern U.S. from March 18-22, which could reduce heating demand.

Market Conditions and EIA Report Highlights

On Monday, natural gas prices surged to a two-year high as concerns grew over tight U.S. nat-gas storage levels ahead of the summer air-conditioning season. BloombergNEF forecasts that U.S. gas storage will be 10% below the five-year average this summer. As of March 7, EIA inventories were -11.9% below the five-year average, marking the tightest supplies in over two and a half years.

Production and Demand Metrics

According to BNEF, dry gas production in the Lower-48 states was 107 bcf/day, up 4.0% year-over-year on Thursday. Demand reached 77.6 bcf/day, increasing 8.3% compared to the previous year. LNG net flows to U.S. export terminals also rose to 15.4 bcf/day, gaining 2.0% week-over-week.

Increased electricity generation is further boosting nat-gas demand from utility providers. The Edison Electric Institute reported a year-over-year increase in total U.S. electricity output for the week ending March 8 by +7.8%, reaching 77,360 GWh. Output over the past 52 weeks increased by +3.35% to 4,237,406 GWh.

Long-Term Outlook for Natural Gas

A significant development for nat-gas prices occurred when President Trump lifted the Biden administration’s moratorium on gas export project approvals in January. This move reengaged consideration of about a dozen LNG export projects. Bloomberg reported that the Trump administration is nearing approval of the Commonwealth LNG export facility in Louisiana, which would enhance U.S. LNG export capacity and subsequently increase demand for domestic nat-gas.

Historical Context and Rig Count

This week’s EIA report is bullish for nat-gas, showing a draw of -62 bcf compared to a projected -50 bcf decline. Current inventories are down -27.0% year-on-year and -11.9% below the five-year seasonal average. Additionally, in Europe, gas storage is at 36% of capacity as of March 11, below the five-year average of 47% for this time of year.

Last Friday, Baker Hughes reported a decrease of one active nat-gas drilling rig in the week ending March 7, bringing the total to 101 rigs. This figure remains modestly above a 3-1/2 year low of 94 rigs recorded on September 6, 2024, and reflects a significant decline from a 5-1/4 year high of 166 rigs reached in September 2022, following a pandemic-era low of 68 rigs in July 2020.

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 for informational purposes only. For more details, please view the Barchart Disclosure Policy here.

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