Natural Gas Prices Surge on Tariff Pause and Weather Forecasts

Natural gas prices jumped over 10% following a tariff pause by Trump, boosting sentiment and demand forecasts. Investors should monitor expected inventory changes and drilling activity as these factors influence the market outlook.

Date: 10-04-2025

AI Rating: 7

Natural Gas Price Surge - Recent developments have led to a significant rise in natural gas prices, up by 10.13%. This increase can be attributed to President Trump's announcement of a 90-day pause on reciprocal tariffs for 56 countries, which has bolstered market risk sentiment and activated short covering in futures. Additionally, forecasts indicating cooler weather in the U.S. are raising expectations for heating demand, further supporting price movements.

Weather Impact and Storage Levels - The Commodity Weather Group has predicted a shift to cooler temperatures in certain regions, which is expected to heighten heating demand for natural gas. Moreover, BloombergNEF's projections that U.S. gas storage levels could be 10% below average this summer adds to the bullish sentiment for natural gas prices. Lower natural gas supplies and high consumption rates make the market susceptible to fluctuations.

Production and Demand - Up-to-date readings reported that Lower-48 state dry gas production was recorded at 103.9 bcf/day, marking a 3.1% increase compared to the previous year. Meanwhile, demand rose by 11.5% year-over-year, signaling robust consumption trends. Additionally, an increase in U.S. electricity output, up by 4.05% year-over-year, indicates a greater demand for natural gas from utility providers, which could positively impact prices moving forward.

Future Projections - A bullish long-term factor is the lifting of the pause on approving gas export projects, which could significantly increase liquid natural gas (LNG) export capacity. This anticipated rise in capacity supports a sustainable demand trajectory for U.S. natural gas.

However, upcoming EIA inventory reports indicate an anticipated inventory increase that exceeds seasonal averages. The recent report of a buildup in inventories, surpassing market expectations, could introduce bearish sentiment if this trend continues. The recent decrease in the active U.S. natural gas drilling rigs also reflects underlying caution regarding future production potential.

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