Natural Gas News: Can Storage Tightness Offset Weak Demand in the Weeks Ahead?

How Did Weather Impact Demand?

Mild temperatures continued to limit natural gas demand last week, keeping pressure on prices. Most of the U.S. experienced unseasonably warm conditions, with highs ranging from the upper 50s to 80s across the interior. While a brief cooldown is expected early next week, it is unlikely to provide significant support for demand.

Forecasts from Atmospheric G2 indicate that warmer-than-normal conditions will persist through late March, potentially curbing heating demand further. This ongoing softness in demand has contributed to weakness in the natural gas forward curve, as traders anticipate a transition into the spring storage build season.

Last week, U.S. Natural Gas Futures settled at $4.104, down $0.295 or -6.71%.

How Are Storage and Production Trends Affecting the Market?

Despite weak demand, natural gas storage remains below historical levels. The latest EIA report showed a larger-than-expected withdrawal of 62 Bcf for the week ending March 7, exceeding the consensus estimate of 50-54 Bcf. This helped stabilize prices briefly, as storage levels are now 11.9% below the five-year average and the tightest they have been in over two years.

On the production side, Lower-48 dry gas output remains flat, averaging 107.1 Bcf/day, a modest 4.6% year-over-year increase. Meanwhile, demand stood at 77.0 Bcf/day, up 5.7% from the prior year. Liquefied natural gas (LNG) export flows edged slightly lower to 15.2 Bcf/day, reflecting maintenance-related disruptions.

Is LNG Expansion a Bullish Factor for Prices?

Longer-term, the expansion of U.S. LNG export capacity remains a key bullish factor. The Trump administration is expected to approve the Commonwealth LNG export facility in Louisiana, adding to U.S. export potential. Additionally, President Trump lifted the Biden administration’s pause on LNG export project approvals earlier this year, clearing the way for a backlog of projects.

If these facilities move forward, U.S. gas demand for exports could rise significantly, tightening domestic supply and offering price support. However, in the short term, LNG flows remain relatively steady, limiting their immediate impact on pricing.

Market Outlook: Will Fundamentals Shift the Balance?

The short-term outlook remains bearish as persistent warmth continues to limit heating demand. Weather models indicate that above-normal temperatures will dominate most of the Lower 48 through late March, keeping national consumption soft. While a brief cooldown early next week may provide a slight boost to demand, it is unlikely to shift the overall trend.

On the supply side, storage withdrawals have exceeded expectations, keeping inventories below the five-year average. However, with production holding steady and LNG export flows seeing only minor fluctuations, the market lacks a clear catalyst for a supply-driven rally.

Looking ahead, traders should watch for any changes in weather forecasts, as a shift toward colder temperatures could quickly tighten the supply-demand balance. Additionally, any disruptions to production or stronger LNG demand signals could provide fundamental support. Until then, the market remains vulnerable to downside pressure driven by weak consumption and the seasonal transition toward the storage refill period.

Technically, the main trend is up, but last week’s closing price reversal top suggests the selling may be greater than the buying at current price levels.

The key level to watch is the weekly pivot at $3.924. This price will control the direction of the market this week. A sustained move over the pivot will indicate the presence of buyers. If this creates enough up side momentum then look for a restest of $4.428, followed by $4.901. A sustained move under the pivot could trigger an acceleration to the downside with $2.946 a near-term possibility if bearish conditions prevail.

More Information in our Economic Calendar.