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Natural Gas Gains Amid Tight Supply and Increased Demand

Natural gas prices show a positive trend with a 0.85% increase on the latest report, driven by tight supplies and rising demand. The projection of lower US gas storage levels ahead of summer also adds bullish momentum.

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AI Rating:   6
Market Performance
April Nymex natural gas (NGJ25) has shown moderate gains, closing up by 0.85%. This increase can be attributed to mixed weather forecasts and signs of tight gas storage levels, which typically support price increases.

Supply and Demand Dynamics
It was reported that lower-48 state dry gas production is at 105 bcf/day, up by 1.9% year-on-year. This production increase might not suffice against the backdrop of significant demand trends. Gas demand in the lower-48 is reported at 75.8 bcf/day, showing a noteworthy decline of 17.0% year-on-year, indicating a potential oversupply situation.

Market Outlook
The report highlighted the bullish effect of the recent draw in nat-gas inventories, which fell by 62 bcf, outpacing the anticipated draw of 50 bcf and the five-year average of 56 bcf. Currently, inventories stand at -27.0% year-on-year and -11.9% below the five-year average, reinforcing the notion of tight supply. This low inventory situation is further compounded by projections of US gas storage being 10% below normal for the coming summer, which adds a strain on supply.

Federal Policy Impact
Additionally, the Trump administration's approval of LNG export projects creates a positive long-term demand outlook for nat-gas. The potential increase in export capacity would likely sustain upward pressure on prices as domestic demand from utility providers also rises due to an overall increase in electricity output, which was up 7.8% year-on-year for the recent week.

Rig Count and Future Production
However, a slight concern arises from the Baker Hughes report indicating a decrease in active drilling rigs, with the number falling to 100 rigs, above the recent historical low. This trend suggests a cautious forward outlook on production increases, which could limit future supply growth.
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