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Is Weather Cooling Off Bullish Momentum?
Forecasts for unseasonably warm temperatures in mid-March are reducing heating demand expectations. Atmospheric G2 predicts above-normal temperatures in the northern and western U.S. from March 16-20, limiting demand. Similarly, NatGasWeather reports that large portions of the interior U.S. will see highs ranging from the upper 50s to the 80s, further curbing consumption.
Despite weak short-term demand, storage remains below historical levels. BloombergNEF projects U.S. natural gas inventories will be 10% below the five-year average by summer, while the latest EIA data shows current storage is already 11.3% under its seasonal norm. This tightness could provide support if demand conditions improve.
Is Production Too Weak to Sustain a Sell-Off?
Lower-48 dry gas production stands at 106.0 Bcf/day, marking a 2.7% year-over-year increase. However, demand has softened, falling 4.4% from last year to 77.2 Bcf/day. LNG exports have also edged lower, with flows to terminals dipping to 14.9 Bcf/day.
The latest EIA storage report was bearish, showing a withdrawal of just 80 Bcf—below both the expected 93 Bcf draw and the five-year average of 94 Bcf. This suggests demand is not yet strong enough to meaningfully tighten supply. However, Baker Hughes data indicates a slight decline in active gas rigs, signaling restrained production growth that could provide long-term price support.
Can LNG Expansion Drive a Sustained Recovery?
A bullish long-term catalyst is the potential expansion of LNG exports. The Trump administration is expected to approve the Commonwealth LNG export facility in Louisiana, which would boost U.S. export capacity and tighten domestic supply. Meanwhile, President Trump has lifted the Biden administration’s pause on LNG project approvals, opening the door for additional demand growth.
Market Outlook: Where Do Prices Go Next?
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