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April Nymex natural gas (NGJ26) on Thursday closed up +0.024 (+0.75%).
Nat-gas prices on Thursday rallied in sympathy with crude oil and European gas prices amid the Iran war, which is dragging on. Iran’s Supreme Leader Ayatollah Mojtaba Khamenei said on Thursday that Iran’s leverage of closing the Strait of Hormuz should be used, and attacks on Gulf Arab neighbors will continue. Also, UK Defense Secretary Healey said it is increasingly evident that Iran is laying mines in the Strait of Hormuz, which would keep the waterway closed for the foreseeable future.
Nat-gas prices fell back from their best level after EIA nat-gas inventories fell -38 bcf for the week ended March 6, a smaller draw than expectations of -41 bcf.
Mixed weather forecasts also weighed on nat-gas prices, as the Commodity Weather Group forecast well-above-average temperatures across the western half of the US from March 17-21, and cooler readings in the East.
Nat-gas prices surged last week, with European nat-gas prices climbing to a 3-year high last Tuesday due to the war in Iran. Last 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.
US (lower-48) dry gas production on Thursday was 112.3 bcf/day (+5.3% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 84.7 bcf/day (+7.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Thursday were 20.2 bcf/day (+5.4% 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.
As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended March 7 rose +1.00% y/y to 78,133 GWh (gigawatt hours). Also, US electricity output in the 52-week period ending March 7 rose +1.69% y/y to 4,309,018 GWh.
Thursday’s weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended March 6 fell by -38 bcf, a smaller draw than the market consensus of -41 bcf and the 5-year weekly average draw of -64 bcf. As of March 6, nat-gas inventories were up +8.8% y/y and -0.9% below their 5-year seasonal average, signaling near-normal nat-gas supplies. As of March 10, gas storage in Europe was 29% full, compared to the 5-year seasonal average of 43% 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 6 fell by -2 to 132 rigs, falling back from the prior week’s 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.
