Natural gas prices bounce back as forecasts shift

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Natural Gas Prices Rise Amid Cooler Forecasts—and Global Supply Jitters

A Market Caught Between Weather, Production, and Geopolitical Risk

Natural gas prices have edged higher in recent days, driven by shifting weather patterns and a scramble among traders to unwind bearish bets. Forecasts now predict cooler-than-normal temperatures across much of the central and eastern U.S. through mid-April, before a late-month warming trend returns. This sudden shift in expectations has forced those who bet against gas prices to scramble back into the market, lifting values upward.

From Record Lows to a Fragile Rebound

Just weeks ago, gas prices plunged to their lowest levels in over a year as unusually mild weather slashed heating demand and filled storage facilities to near capacity. The market’s fragile rebound comes despite rising production outlooks—government analysts now project U.S. dry natural gas output to hit 109.6 billion cubic feet per day by 2026, up from current near-record levels. Drilling activity has surged, with gas field rig counts recently hitting a two-and-a-half-year high.

Last week alone, the U.S. produced 110.7 billion cubic feet of dry gas—a 3% increase from the same day last year. Yet demand remained weak, falling 4% to 70 billion cubic feet as homes and businesses used less. Meanwhile, liquefied natural gas (LNG) exports held steady at 19.9 billion cubic feet, unchanged from the prior week.

Global Supply Disruptions Could Shift the Tide

A potential price catalyst may emerge from unforeseen supply disruptions abroad. In late March, a major LNG plant in Qatar suffered severe damage, removing roughly one-fifth of its export capacity for years to come. Given that Qatar supplies one-fifth of the world’s LNG, the outage could redirect demand toward U.S. exports.

Geopolitical tensions have further tightened global supplies by restricting shipments through a key Persian Gulf shipping lane—limiting deliveries to European and Asian buyers. With European gas storage levels at just 30% full (well below the typical spring average of 42%), any sustained supply crunch could ease pressure on U.S. storage and boost exports.

Storage Glut and Weak Demand Keep a Lid on Gains

Despite the bullish signals, not all forces are pushing prices higher. Last week’s larger-than-expected storage build—adding 59 billion cubic feet—raised concerns over surplus supplies. Storage levels now sit 7% above last year’s totals and 6% above the five-year average, a stark contrast to Europe’s scarcity.

Power generation also dipped slightly week-over-week, though year-over-year output remains up nearly 2%. Meanwhile, U.S. drilling rig counts fell slightly after hitting recent highs, though activity still far exceeds the lows of late 2024.

The Bottom Line: A Market on the Edge

Gas prices face clashing forces—shifting weather, soaring production, and unexpected global disruptions. While short-term rallies may occur, the specter of abundant U.S. supply and tepid demand continues to loom large. Traders remain on edge, watching for the next catalyst in a market where every forecast—and geopolitical tremor—can tip the scales.