April Nymex natural gas (NGJ25) on Thursday closed down -0.148 (-3.33%).
April nat-gas prices on Thursday retreated after weekly EIA nat-gas supplies fell less than expected. The EIA reported that nat-gas inventories for the week ended February 28 fell -80 bcf, a smaller draw than expectations of -93 bcf. The outlook for warmer US weather that will curb heating demand for nat-gas also weighed on nat-gas prices. On Thursday, forecaster Atmospheric G2 said that the eastern two-thirds of the US is expected to see spring-like warmth for March 11-15.
The beginning of US tariffs of 10% on Tuesday on Canadian nat-gas imports will put upward pressure on US nat-gas prices since US importers will have to pay those tariffs. In addition, the Canadian province of Ontario said it may impose a 25% export tariff on electricity it sends to 1.5 million homes in Minnesota, Michigan, and New York if the US tariffs are kept in place, which would boost demand for domestic electricity generated by nat-gas.
Nat-gas prices surged to a 2-year high Tuesday and have been whipsawed over the past week by weather factors and remain near the top of the February rally, which was driven mainly by the inventory drawdown caused by the recent cold weather. As of February 28, EIA nat-gas inventories were -11.3% below their 5-year average, and near the tightest supplies have been in over 2-1/2 years.
Lower-48 state dry gas production Thursday was 107 bcf/day (+5.4 y/y), according to BNEF. Lower-48 state gas demand Thursday was 92.5 bcf/day (+15.2% y/y), according to BNEF. LNG net flows to US LNG export terminals Thursday were 15.3 bcf/day (-0.6% 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 Wednesday that total US (lower-48) electricity output in the week ended March 1 rose +2.15% y/y to 76,865 GWh (gigawatt hours), and US electricity output in the 52-week period ending March 1 rose +3.16% y/y to 4,231,788 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. Bloomberg reported that the Trump administration is close to approving its first LNG export project, a Commonwealth LNG export facility in Louisiana. Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.
Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended February 28 fell -80 bcf, a smaller draw than expectations of -93 bcf and a smaller draw than the 5-year average draw for this time of year of -94 bcf. As of February 28, nat-gas inventories were down -24.6% y/y and -11.3% below their 5-year seasonal average, signaling tight nat-gas supplies. In Europe, gas storage was 37% full as of March 4, versus the 5-year seasonal average of 49% 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 February 28 rose +3 to 102 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).
