NEW YORK — U.S. natural gas futures surged Monday, driven by short covering ahead of the expiration of the May Nymex contract. May natural gas (NGK25) settled at a robust gain of 23.3 cents, or 7.98%, reflecting a sharp reversal from last week’s decline.
The rally comes just days after natural gas prices touched a five-month low, pressured by mild spring temperatures that reduced heating demand and led to a larger-than-expected inventory build. The latest data from the U.S. Energy Information Administration (EIA) showed a storage increase of 88 billion cubic feet (bcf) for the week ending April 18—exceeding both analyst expectations of 75 bcf and the five-year seasonal average of 58 bcf.
Despite the recent bearish data, broader supply and demand dynamics are providing upward pressure. BloombergNEF forecasts that U.S. gas storage could be 10% below the five-year average heading into the summer air-conditioning season, which would keep supplies tight.
Daily dry gas production in the Lower 48 states on Monday stood at 105.9 bcf, up 6.8% year-over-year, while demand was reported at 64.8 bcf/day, a 4.3% annual increase, according to BloombergNEF. Additionally, liquefied natural gas (LNG) flows to export terminals reached 15.6 bcf/day, up 5.5% week-over-week, signaling resilient international demand.
Electricity output is also on the rise, further supporting natural gas consumption by utilities. The Edison Electric Institute reported a 2.1% year-over-year increase in electricity generation in the week ending April 19, with total U.S. output reaching 72,587 gigawatt-hours (GWh). Over the past 52 weeks, electricity output rose 3.7% to over 4.24 million GWh.
Adding to the bullish long-term outlook, President Donald Trump earlier this year lifted the Biden administration’s freeze on new LNG export approvals. The move reopens consideration of over a dozen stalled export projects and is expected to bolster future demand for U.S. natural gas.
Still, some headwinds remain. Last week’s inventory report, although reflective of tight year-over-year conditions, showed that storage levels were just 2.3% below their five-year seasonal average as of April 18, and 20.2% lower than the same time last year. European storage trends also showed weakness, with facilities only 38% full compared to a five-year average of 48% for this time of year.
On the supply side, Baker Hughes reported a modest increase in U.S. natural gas drilling activity. The rig count rose by one to 99 rigs for the week ending April 25. While up slightly from the four-year low of 94 rigs in September 2024, this remains well below the recent peak of 166 rigs seen in September 2022.
The convergence of contract expiration dynamics, ongoing tight supply expectations, and rising LNG export and power generation demand are likely to keep natural gas markets volatile in the coming weeks.
