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Production Holds Steady Despite Falling Rig Counts
Despite a drop in the U.S. natural gas rig count—down seven last week to just 96—output remains strong. Lower-48 dry gas production averaged 106.4 Bcf/d on Friday, up over 4% from a year ago. This persistent output is meeting softening demand head-on. Industrial and residential usage remains subdued, and power burn, while stable, has yet to show the typical seasonal ramp-up. The result is a market with more supply than it currently needs, particularly in the absence of weather-related demand spikes.
Did the Latest Storage Report Shift Market Expectations?
Yes. The EIA reported a 29 Bcf injection into storage for the week ending March 28, well above the five-year average draw for that period. While inventories are still 21.5% lower than last year and 4.3% below the five-year norm, the size of the early injection signaled that mild weather and excess supply are beginning to rebuild stockpiles earlier than expected. This has added to the near-term bearish tone, especially as traders focus on the potential for larger-than-usual builds in the coming weeks.
Can LNG Exports Offset Domestic Weakness?
LNG exports remain a bright spot, with flows to U.S. export terminals holding near 15.5 Bcf/d. While down slightly from the prior week, they continue to support baseline demand. Longer term, President Trump’s move to lift restrictions on LNG export project approvals has reactivated a backlog of infrastructure proposals. If even a portion of these projects moves forward, it would meaningfully increase export capacity and help balance domestic oversupply. For now, however, the export story is more supportive for long-term pricing than for the current supply-demand mismatch.
Market Forecast: Bearish Near Term on Demand and Supply Imbalance
The short-term outlook for natural gas remains bearish. Weaker weather-driven demand, strong production, and early-season storage builds are tilting the market toward oversupply. Unless colder weather unexpectedly returns or LNG demand accelerates, prices may continue to face downward pressure in the week ahead.
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