May Nymex natural gas (NGK26) on Tuesday closed down -0.003 (-0.10%).

Nat-gas prices tumbled to a 5-week low on Tuesday and settled slightly lower.   The outlook for above-normal US spring temperatures, which will reduce nat-gas heating demand and boost storage levels, is weighing on gas prices.  However, nat-gas prices recovered most of their losses on Tuesday when the Commodity Weather Group said forecasts shifted colder, although above-average temperatures are still expected across the eastern half of the US through April 4.  

Nat-gas prices also have some medium-term support on the outlook for tighter global LNG supplies.  On March 19, Qatar reported "extensive damage" at the world's largest natural gas export plant at Ras Laffan Industrial City.   Qatar said the attacks by Iran damaged 17% of Ras Laffan's LNG export capacity,  a damage that will take three to five years to repair.   The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports.  Also, the closure of the Strait of Hormuz due to the war in Iran has sharply curtailed nat-gas supplies to Europe and Asia.

US (lower-48) dry gas production on Tuesday was 113.3 bcf/day (+5.1% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 71.2 bcf/day (-7.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 19.8 bcf/day (+0.5% 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 a January 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 in late February.

As a positive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended March 21 rose +7.5% y/y to 77,717 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending March 21 rose +1.8% y/y to 4,317,398 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended March 20 fell by -54 bcf, a larger draw than expectations of -48 bcf and the 5-year weekly average draw of -21 bcf.  As of March 20, nat-gas inventories were up +4.9% y/y, and +0.8% above their 5-year seasonal average, signaling ample nat-gas supplies.  As of March 28, gas storage in Europe was 28% full, compared to the 5-year seasonal average of 41% 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 27 fell by -4 to 127, modestly below the 2.5-year high of 134 rigs from February 27.  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.