April Nymex natural gas (NGJ25) on Monday closed up +0.092 (+2.09%).
April nat-gas prices on Monday rallied to a new 2-year high on signs that US nat-gas storage levels could tighten further ahead of the summer air-conditioning season. BloombergNEF projects that US gas storage will be 10% below the five-year average this summer. 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.
Nat gas prices fell back from their best levels Monday on forecasts for warmer US weather that will reduce heating demand for nat-gas. Forecaster Maxar Technologies said Monday that the eastern half of the US will trend warmer to above-average temperatures for March 15-19.
Lower-48 state dry gas production Monday was 107.3 bcf/day (+4.9 y/y), according to BNEF. Lower-48 state gas demand Monday was 81.7 bcf/day (-3.8% y/y), according to BNEF. LNG net flows to US LNG export terminals Monday were 15.7 bcf/day (+4.8% 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 last 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.
Last 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 March 7 fell -1 to 101 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).
