Natural Gas Prices Fall Amid Mixed Weather and Inventory Rise

Natural gas prices plummeted as risk-off sentiment gripped markets. A milder weather outlook combined with a rise in inventories led to bearish signals for the commodity. Investors should monitor production and electricity demands closely.

Date: 11-04-2025

AI Rating: 5

Market Dynamics Impacting Natural Gas Prices: The current decline in May Nymex natural gas prices, down 6.79%, is influenced by a broader selloff in equity markets, suggesting heightened risk aversion among investors. The weather forecast indicates mixed temperatures, with cooler conditions expected in the eastern US and warmer forecasts in the central and western regions, impacting demand dynamics.

The latest EIA report showed a rise in natural gas inventories by 57 bcf, slightly below expectations but well above the five-year average of 17 bcf for this time of year, indicating potential oversupply concerns. Despite inventories being down 19.8% year-over-year, the relatively high inventory build could continue to apply downward pressure on prices if demand does not improve.

Sustained Demand and Production Levels: On the positive side, lower-48 dry gas production has seen a significant year-over-year increase, producing 105.5 bcf/day, which is 4.6% higher than the previous year. Similarly, demand growth at 78.7 bcf/day has risen by 13.7% year-over-year, which could sustain price levels if continued. The increase in LNG export flows could also provide upward price support as President Trump has lifted restrictions on gas export projects, allowing for a backlog of LNG projects to be expedited.

Furthermore, a positive increase in electricity generation output contributes positively to the demand for natural gas, with a reported growth of 4.05% year-on-year in the first week of April, indicating that utility providers are likely to fuel their operations with natural gas. Overall, while there are signs of potential bearish trends in prices due to inventory levels, the underlying demand trends and export capabilities could provide a counterbalance in the longer term.

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