April natural gas (NGJ25) prices closed down on Friday, falling by 0.007 (-0.17%).
The drop came as forecasts predicted warmer temperatures across the US, which would reduce heating demand for natural gas. The Atmospheric G2 model expects above-normal temperatures for most of the lower 48 states from March 24 to March 28.
Earlier in the week, natural gas prices surged to a two-year high as concerns grew that US natural gas storage could remain tight ahead of the summer cooling season. According to BloombergNEF, US gas storage levels are expected to be 10% below the five-year average this summer. As of March 7, the Energy Information Administration (EIA) reported that natural gas inventories were 11.9% lower than the five-year average, marking the tightest supply levels in over two and a half years.
On Friday, dry gas production in the lower 48 states reached 107.1 billion cubic feet per day (bcf/day), up by 4.6% from last year. Gas demand in these states was 77.0 bcf/day, a 5.7% increase from the previous year. LNG net flows to US export terminals were 15.2 bcf/day, a slight decrease of 0.1% week-over-week.
An increase in US electricity generation is expected to boost natural gas demand from utility providers. The Edison Electric Institute reported that total US electricity output rose by 7.8% year-over-year in the week ending March 8, reaching 77,360 gigawatt hours (GWh). Over the past 52 weeks, US electricity output rose by 3.35% to 4,237,406 GWh.
In a positive sign for long-term natural gas prices, President Trump lifted a pause on gas export project approvals in January. This decision allowed for the consideration of about a dozen LNG export projects, including the Commonwealth LNG export facility in Louisiana. Bloomberg reports that the Trump administration is nearing approval of its first LNG export project. Increased US LNG export capacity would boost natural gas demand and support prices.
Thursday’s weekly EIA report was also favorable for natural gas prices, showing a larger-than-expected inventory draw of 62 bcf for the week ending March 7, compared to the forecasted 50 bcf. This was also a bigger draw than the five-year average of 56 bcf for this time of year. As of March 7, natural gas inventories were 27.0% lower than last year and 11.9% below the five-year seasonal average, indicating tight supply conditions. In Europe, gas storage was 36% full as of March 11, compared to the five-year average of 47% for this time of year.
Baker Hughes reported that the number of active natural gas drilling rigs in the US fell by 1 to 100 rigs for the week ending March 14. This is slightly above the 3-and-a-half-year low of 94 rigs reached in September 2024. Active rigs have declined since reaching a 5-and-a-quarter-year high of 166 rigs in September 2022, following the pandemic-era low of 68 rigs in July 2020.
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