April Nymex natural gas (NGJ25) on Wednesday closed down sharply by -0.369 (-8.29%).
April nat-gas on Wednesday tumbled to a 1-week low and settled sharply lower as warm US weather forecasts for the middle of March threaten to curb heating demand for gas. Forecaster Maxar Technologies said Wednesday that temperatures are expected to be well above normal for the Midwest and the eastern part of the US for March 17-21.
On Monday, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight 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.
Lower-48 state dry gas production Wednesday was 106.8 bcf/day (+4.0 y/y), according to BNEF. Lower-48 state gas demand Wednesday was 78.6 bcf/day (+7.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Wednesday were 15.3 bcf/day (-0.5% 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 8 rose +7.8% y/y to 77,360 GWh (gigawatt hours), and US electricity output in the 52-week period ending March 8 rose +3.35% y/y to 4,237,406 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.
The consensus is that Thursday's weekly EIA nat-gas inventories will fall -50 bcf for the week of March 7, a smaller draw than the five-year average for this time of year of -56 bcf.
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 9, versus the 5-year seasonal average of 47% 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).
