Natural Gas Prices Plummet Amid Rising Supplies and Warm Weather

Natural gas prices dropped sharply as warmer weather and increased supplies dampened demand. The latest EIA report shows inventories rose significantly, creating bearish sentiment in the market.

Date: 21-03-2025

AI Rating: 5

Market Overview: Recently, April Nymex natural gas prices experienced a significant decline of 6.40%, closing down by 0.272. This drop is attributed to a larger-than-expected rise in weekly EIA supplies, which reached +9 bcf compared to the anticipated +4 bcf. The increase in inventories, combined with forecasts of warmer-than-normal weather throughout the U.S., is expected to reduce heating demand for natural gas, further influencing prices downward.

Implications for EPS and Revenue: The rise in natural gas inventories could contribute to lower prices, potentially impacting the earnings per share (EPS) of companies in the natural gas sector, as revenues may decline due to reduced prices and lower demand forecasts. The bearish sentiment surrounding natural gas could suggest an expectation of diminished profitability moving forward.

Production and Demand Dynamics: According to BNEF, lower-48 state dry gas production stood at 105.9 bcf/day, exhibiting a year-on-year increase of 3%. However, demand has slipped, dropping to 82.0 bcf/day, a decline of 6.7% annually. This mismatch between production and demand could exacerbate the pressure on prices in the near term. Conversely, LNG net flows to U.S. export terminals rose to 15.5 bcf/day, indicating some sustained demand for exported gas.

Long-Term Outlook: In the long-term, recent developments in policy — specifically the approval of LNG export projects — may provide some bullish sentiment. President Trump’s lifting of the Biden administration’s pause on these approvals could pave the way for increased demand from external markets. Increased capacity for U.S. LNG exports is likely to support natural gas prices in the long run.

Technical Analysis: The reported incident of active drilling rigs in the U.S. dropping to 100, while still higher than a past low, indicates a cautious market. This coupled with the expected lower-than-average gas storage levels this summer could lead to volatility as market participants react to changing supply dynamics and weather forecasts throughout the season.

Stocks: XOM CVX BP