Warm Weather Forecasts Weigh on Natural Gas Prices

Natural gas prices have dipped following forecasts of warmer weather, impacting heating demand. Analysts suggest this shift could lead to pricing volatility as storage levels remain tight ahead of summer.

Date: 12-03-2025

AI Rating: 5

**Market Overview**: April nat-gas prices settled lower due to forecasts for warmer spring weather, which is likely to reduce heating demand for gas. This anticipation can create hesitancy among investors, potentially affecting stock prices in related sectors.

**Storage Levels and Supply**: BloombergNEF reported that US nat-gas storage levels are projected to be 10% below the five-year average this summer. As of February 28, inventories were -11.3% below the five-year average, indicating tight supplies. While lower inventories can often lead to price surges, the current bearish sentiment resulting from warmer weather predictions suggests that prices may continue to face pressure in the short term.

**Production and Demand**: There was a reported growth in lower-48 state dry gas production to 106.0 bcf/day (+2.7 y/y), alongside a decline in gas demand at 77.2 bcf/day (-4.4% y/y). The supply-demand balance is being challenged, which can lead to significant price fluctuations in the nat-gas market. Additionally, a positive aspect is the increase in US electricity output of +2.15% y/y, which could bolster nat-gas demand from utility providers, offering some counterbalance to the dropping demand figures.

**Export Capabilities**: A longer-term bullish factor for nat-gas prices is the Trump administration's decision to resume approvals for LNG export projects. This regulatory change could enhance demand for US nat-gas, which is a critical factor for investors to monitor. Increased export capacity can lead to greater demand, potentially stabilizing or even driving up prices as domestic supply meets international needs.

**Overall Sentiment**: The latest EIA report showed a smaller than expected reduction in nat-gas inventories, which, combined with the active rig count remaining above significant lows, presents challenges for the sector. Market sentiment is currently mixed, with immediate bearish indicators conflicting with longer-term positive potential through increased exports.

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