Natural Gas Prices Decline Amid Warm Weather Forecasts

Natural gas prices fell sharply due to revised warmer weather forecasts, impacting heating demand. With inventories above seasonal averages and continued strong production, investors should assess the implications for nat-gas stocks.

Date: 15-04-2025

AI Rating: 5

Market Reactions to Weather Forecasts
The decline of -5.73% in natural gas prices can be attributed to warmer US weather forecasts, which reduce heating demand. If warmer temperatures persist, investors may anticipate continued pressure on natural gas prices, affecting stocks within the sector.

Inventory Levels
Data from EIA indicates that natural gas inventories rose by +57 bcf, aligning closely with expectations. While still down -19.8% year-on-year, the fact that inventory builds are near average is bearish for prices. Higher inventories suggest market oversupply relative to current demand, which could continue to weigh on price sentiment in the short term.

Production and Demand Statistics
Natural gas production remains robust, with Lower-48 state dry gas production reported at 106.7 bcf/day, a +5.7% increase year-on-year. Demand also rose by +3.2% year-on-year, signifying that usage remains steady despite the warmer forecast. This contrast of growing demand and production can balance each other, keeping the market somewhat stable.

Long-term Outlook on LNG Exports
In a longer-term perspective, Trump's approval of LNG export projects could substantially increase domestic demand for natural gas. If realized, this development might support nat-gas prices in the face of current bearish trends. However, the immediate sentiment remains cautious given current price declines and inventory data.

Active Drilling Rigs
Baker Hughes reported a modest increase in active US nat-gas drilling rigs, now totaling 97. This increase may eventually contribute to further production capacity. While current production is strong, the historical context shows rig counts are significantly lower than previous years, indicating potential caution among producers.

Conclusion
The short-term sentiment for natural gas prices looks bearish due to the warmer weather forecasts and rising inventories, but long-term prospects may improve with increased LNG exports. Investors should remain cautious in the near term while keeping an eye on strategic developments.

Stocks: XOM CVX SWN CPK