Nat-Gas Prices Rally as Iran War Drags On

April Nymex natural gas (NGJ26) on Wednesday closed up +0.189 (+6.26%).

Nat-gas prices on Wednesday rallied in sympathy with crude oil prices and European gas prices as the Iran war drags on.  Missiles hit three vessels on Wednesday in the Strait of Hormuz and the Persian Gulf, and new missile volleys hit Israel.  President Trump made no new comments suggesting there will be an imminent end to the war.  Also, the US Navy has not yet tried to reopen the Strait of Hormuz, with a major complication being the possibility that Iran laid mines.

Heating demand is expected to remain below normal through the remainder of the week due to warmer weather forecasts.

The market consensus is for natural gas inventories to fall -41 bcf in Thursday’s report, a smaller draw than the 5-year average of -64 bcf.

Nat-gas prices surged last week, with European nat-gas prices climbing to a 3-year high last Tuesday due to the war in Iran.  Last Monday, Qatar shut its Ras Laffan plant, the world’s largest natural gas export facility, after it was targeted by an Iranian drone attack.  The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and its closure could boost US nat-gas exports.

US (lower-48) dry gas production on Wednesday was 111.8 bcf/day (+3.9% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 76.4 bcf/day (+0.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 19.7 bcf/day (+2.9% w/w), according to BNEF.

Projections for higher US nat-gas production are bearish for prices.  On February 17, the EIA raised its forecast for 2026 US dry nat-gas production to 109.97 bcf/day from last month’s estimate of 108.82 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high last Friday.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended March 7 rose +1.00% y/y to 78,133 GWh (gigawatt hours).  Also, US electricity output in the 52-week period ending March 7 rose +1.69% y/y to 4,309,018 GWh.

Last Thursday’s weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended February 27 fell by -132 bcf, a larger draw than the market consensus of -124 bcf and the 5-year weekly average draw of -96 bcf.  As of February 27, nat-gas inventories were up +7.2% y/y and -2.2% below their 5-year seasonal average, signaling near-normal nat-gas supplies.  As of March 4, gas storage in Europe was 30% full, compared to the 5-year seasonal average of 44% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending March 6 fell by -2 to 132 rigs, falling back from the prior week’s 2.5-year high of 134 rigs.  In the past 17 months, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com