April Nymex natural gas (NGJ26) on Wednesday closed down by -0.137 (-4.49%).

April nat-gas prices tumbled on Wednesday, giving back some of this week’s gains after a report from the NY Times claimed that Iran was ready to discuss ending the conflict, which eased for over a prolonged conflict that could disrupt Middle Eastern gas supplies.  However, Iran’s semi-official Tasnim news agency called the report “pure falsehood and psychological warfare.”

Natural gas prices also fell on Tuesday’s comments from President Trump, who said the US will ensure the free flow of energy through the Strait of Hormuz with insurance guarantees and even naval escorts.    

Forecasts for warmer US weather, which would diminish nat gas heating demand, also weighed on prices.  On Wednesday, the Commodity Weather Group said forecasts shifted slightly warmer, with above-average temperatures expected across the eastern half of the US through March 13.

Nt-gas prices surged Monday and Tuesday due to the war in Iran.  On Monday, Qatar shut its Ras Laffan plant, the world’s largest natural gas export facility, after it was targeted by an Iranian drone attack.  The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and its closure could boost US nat-gas exports.  Nat-gas prices also had carryover support from Tuesday’s surge in European nat-gas prices to a 3-year high.

US (lower-48) dry gas production on Wednesday was 112.9 bcf/day (+6.0% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 82.7 bcf/day (-2.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 19.3 bcf/day (-1.5% w/w), according to BNEF.

Projections for higher US nat-gas production are bearish for prices.  On February 17, the EIA raised its forecast for 2026 US dry nat-gas production to 109.97 bcf/day from last month’s estimate of 108.82 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high last Friday.

Natural gas prices surged to a 3-year high on January 28, driven by the massive storm that disrupted the US with Arctic cold weather.  The well below normal temperatures caused freeze-ups in gas wells, disrupted production in Texas and elsewhere, and drove a spike in demand for natural gas for heating.   About 50 billion cubic feet of natural gas came offline, or about 15% of total US natural gas production, due to freeze-ups.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended February 28 rose +7.84% y/y to 82,888 GWh (gigawatt hours).  Also, US electricity output in the 52-week period ending February 28 rose +1.8% y/y to 4,308,245 GWh.

The consensus is that Thursday’s weekly EIA nat-gas inventories will decline by -124 bcf for the week ended February 27.

Last Thursday’s weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended February 20 fell by -52 bcf, a slightly larger draw than the market consensus of -50 bcf but well below the 5-year weekly average draw of -168 bcf.  As of February 20, nat-gas inventories were up +9.7% y/y and -0.3% below their 5-year seasonal average, signaling near-normal nat-gas supplies.  As of March 2, 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 active US nat-gas drilling rigs in the week ending February 27 rose by 1 to a 2.5-year high of 134 rigs.  In the past 17 months, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.
 

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