US natgas prices drop 5% to 7-week low on record output and tariff worries

U.S. natural gas futures dropped about 5% to a seven-week low on Monday on record output and worries U.S. President Donald Trump's tariffs could reduce global economic growth and demand for energy.

"Although gas is usually a weather-driven market, it is also an industrial commodity subject to the vagaries of the U.S. economic growth path and as a result, the tariff factor may require downward adjustments in expected U.S. gas demand this year," analysts at energy advisory firm Ritterbusch and Associates said.

Gas futures NG1! for May delivery on the New York Mercantile Exchange fell 18.2 cents, or 4.7%, to settle at $3.655 per million British thermal units, their lowest close since February 13.

Prices declined despite forecasts for cooler weather and more gas demand over the next two weeks than previously expected.

Looking ahead, the premium of futures for June over May (NGK25-M25) fell to around 9 cents per mmBtu, its lowest since February 2023.

Energy traders said mild weather and low demand last month likely allowed utilities to add gas to storage in March for the first time since 2012 and only the second time in history.

Gas stockpiles, however, were still about 3% below normal levels for this time of year after cold weather in January and February forced energy firms to pull large amounts of gas out of storage, including record amounts in January.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states edged up to 106.3 billion cubic feet per day so far in April, slightly up from a monthly record 106.2 bcfd in March.

Looking forward, analysts noted the drop in U.S. crude CL1! futures due in part to worries Trump's trade tariffs could result in less oil drilling in shale basins like the Permian in Texas and New Mexico, which could cut gas output associated with that oil production.

Meteorologists projected temperatures in the Lower 48 states would remain mostly near normal through April 22.

With seasonally milder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will fall from 109.4 bcfd this week to 98.7 bcfd next week. Those forecasts were higher than LSEG's outlook on Friday.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. eased to 15.7 bcfd so far in April, down from a monthly record 15.8 bcfd in March.

The U.S. became the world's biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading around a six-month low of around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) (TRNLTTFMc1) benchmark in Europe and held near a three-month low of around $13 at the Japan Korea Marker (JKM) (JKMc1) benchmark in Asia.