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Tariff Fallout Rattles Energy Markets
Trade disputes have unleashed a powerful wave of selling across energy markets for a fourth consecutive session, with May natural gas contracts hitting a 1-3/4 month low. The impact extends beyond natural gas, as crude oil prices have also plunged in response to tariff concerns. This cross-commodity pressure is creating formidable headwinds for gas traders seeking any foothold of price stability.
Storage Deficit Persists Despite Production Gains
Production declined to 103 Bcf/d according to recent estimates, though Tuesday’s Lower-48 state dry gas production rebounded to 104.0 bcf/day (+2.0% y/y). Current storage levels remain tight with inventories down 21.5% year-over-year and 4.3% below the 5-year seasonal average. Last week’s EIA report showed a bearish build of +29 bcf, exceeding expectations of +28 bcf and well above the 5-year average draw of -13 bcf for this time of year.
Demand Forces Collide in Market Tug-of-War
Lower-48 state gas demand Tuesday surged to 82.6 bcf/day, up 16.4% from last year. LNG export terminal flows registered at 15.8 bcf/day (+7.1% w/w). US electricity output rose 0.9% year-over-year to 72,289 GWh for the week ended March 22, with the 52-week figure up 3.55% to 4,239,323 GWh. Meanwhile, active drilling rigs fell by 7 to a 6-1/2 month low of 96 rigs, just above the 3-1/2 year low of 94 rigs from September.
Bearish Near-Term, Trump’s LNG Policy Offers Long-Term Hope
The immediate outlook for natural gas appears bearish as technical indicators point downward and trade war concerns continue to pressure prices. BloombergNEF projects that US gas storage will remain 10% below the five-year average this summer, which could provide some support.
Weather forecasts suggest moderate demand through Wednesday before dropping to low demand levels as temperatures moderate.
The longer-term picture contains bullish potential with President Trump having lifted the previous administration’s pause on approving gas export projects, potentially unlocking significant LNG export capacity that could transform the demand outlook.
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