Natural gas prices fall on global supply constraints

April Nymex Natural Gas (NGJ26) closed up by +0.094 (+3.18%) on Tuesday.

April nit gas prices settled sharply on Tuesday on the back of increased demand for US nit gas supplies. Qatar shut down the Ras Laffan plant, the world’s largest natural gas exporter, after an Iranian drone attack on Monday. The Ross Laffan plant accounts for about 20% of global liquefied natural gas supplies, and its shutdown could boost U.S. liquefied natural gas exports. Net gas prices were also supported by a +22% increase in European net gas prices to a 3-year high on Tuesday.

Nat gas prices extended their gains on Tuesday as fresh weather forecasts called for warmer U.S. temperatures, potentially fueling warming demand for nat gas. The Commodity Weather Group said Tuesday that forecasts for the U.S. through March 12 are cooler, though the eastern half of the country will still be above normal.

According to BNEF, US (bottom-48) dry gas production on Tuesday was 112.8 bcf/day (+4.9% y/y). According to BNEF, 48-state gas demand on Tuesday was 86.3 bcf/day (-5.6% y/y). According to BNEF, net LNG flows to US LNG export terminals on Tuesday were 19.6 bcf/day (+1.3% w/w).

Estimates for higher US gas production are lower for prices. On February 17, the EIA raised its forecast for 2026 US dry nitre gas production to 109.97 bcf/d from last month’s estimate of 108.82 bcf/d. U.S. net gas production is currently near record highs, with active U.S. net gas rigs posting a 2.5-year high last Friday.

Natural gas prices hit a 3-year high on Jan. 28, driven by a major storm that is messing with the U.S. Arctic’s cold air. Below-normal temperatures have caused freezes in gas wells, disrupted production in Texas and elsewhere, and increased demand for natural gas for heating. About 50 billion cubic feet of natural gas came offline, or about 15% of US natural gas, due to the freeze.

As a negative factor for gas prices, the Edison Electric Institute reported last Wednesday that US (min-48) electricity production fell -13.46% y/y to 78,464 GWh (gigawatt hours) in the week ending February 21. However, in the 52 weeks ending February 21, US electricity production rose +1.7% y/y to 4,302,222 GWh.

Last Thursday’s weekly EIA report was bearish for net gas prices, as net gas inventories for the week ended Feb. 20 fell -52 bcf, slightly larger than the market consensus of -50 bcf but well below the 5-year weekly average draw of -168 bcf. As of February 20, nite gas inventories were +9.7% y/y and -0.3% below their 5-year seasonal average, indicating near-normal gas supplies. As of March 1, gas storage in Europe was 30% full, compared to the 5-year seasonal average of 45% full for this time of year.

Baker Hughes reported last Friday that the number of rigs drilling for U.S. nite gas in the week ended Feb. 27 rose by 1 to a 2.5-year high of 134 rigs. Over the past 17 months, the number of gas rigs has risen from a 4.75-year low to 94 rigs reported in September 2024.

As of the date of publication, Amir Espland had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com