Natural Gas News: Weather and Inventory Build Set Bearish Tone

Natural Gas Drops as Demand Softens and Storage Builds Weigh on Sentiment

U.S. natural gas futures retreated over the past week as bearish supply-demand fundamentals overshadowed structural support from LNG exports and long-term inventory tightness. The market settled Friday near $3.84/MMBtu, posting its largest weekly loss since early March, as warmer weather, a bearish storage report, and trade policy concerns converged to dampen sentiment.

Is Weaker Weather-Driven Demand Fueling the Pullback?

Forecasts have turned notably warmer for mid-April, reducing expectations for late-season heating demand. While parts of the Midwest and Northeast may still experience brief cold spells, the broader outlook calls for mild to warm conditions across much of the country. This has left national gas demand in the moderate-to-low range at a time when traders had hoped for a final burst of weather-driven consumption. The lack of heating demand has been a key drag on prices, particularly as supply remains elevated.

Production Holds Steady Despite Falling Rig Counts

Despite a drop in the U.S. natural gas rig count—down seven last week to just 96—output remains strong. Lower-48 dry gas production averaged 106.4 Bcf/d on Friday, up over 4% from a year ago. This persistent output is meeting softening demand head-on. Industrial and residential usage remains subdued, and power burn, while stable, has yet to show the typical seasonal ramp-up. The result is a market with more supply than it currently needs, particularly in the absence of weather-related demand spikes.

Did the Latest Storage Report Shift Market Expectations?

Yes. The EIA reported a 29 Bcf injection into storage for the week ending March 28, well above the five-year average draw for that period. While inventories are still 21.5% lower than last year and 4.3% below the five-year norm, the size of the early injection signaled that mild weather and excess supply are beginning to rebuild stockpiles earlier than expected. This has added to the near-term bearish tone, especially as traders focus on the potential for larger-than-usual builds in the coming weeks.

Can LNG Exports Offset Domestic Weakness?

LNG exports remain a bright spot, with flows to U.S. export terminals holding near 15.5 Bcf/d. While down slightly from the prior week, they continue to support baseline demand. Longer term, President Trump’s move to lift restrictions on LNG export project approvals has reactivated a backlog of infrastructure proposals. If even a portion of these projects moves forward, it would meaningfully increase export capacity and help balance domestic oversupply. For now, however, the export story is more supportive for long-term pricing than for the current supply-demand mismatch.

Market Forecast: Bearish Near Term on Demand and Supply Imbalance

The short-term outlook for natural gas remains bearish. Weaker weather-driven demand, strong production, and early-season storage builds are tilting the market toward oversupply. Unless colder weather unexpectedly returns or LNG demand accelerates, prices may continue to face downward pressure in the week ahead.

Technically, the market’s direction next week will depend on how traders respond to the short-term pivot at $3.935. A sustained move below this level would signal renewed selling pressure. The key trigger for deeper downside remains $3.732; a decisive break beneath this threshold could open the door to further losses. In that case, the next major downside target becomes the longer-term pivot at $3.361.

More Information in our Economic Calendar.