May Nymex natural gas (NGK25) on Monday closed up sharply by +0.233 (+7.98%).

May nat-gas prices rallied sharply on Monday.  Fund short covering ahead of the May nat-gas futures contract expiration on Monday pushed nat-gas prices higher.  

Last Thursday, nat-has prices tumbled to a 5-month nearest-futures low as the warm US spring weather has dampened heating demand for nat-gas and allowed supplies to rebuild.  Thursday's weekly EIA report showed nat-gas inventories rose +88 bcf for the week ended April 18, higher than expectations of +75 bcf and well above the five-year average for this time of year of +58 bcf.

Last month, nat-gas rallied to a 2-year high on signs that US nat-gas storage levels could remain tight ahead of the summer air-conditioning season.  BloombergNEF projects that US gas storage will be 10% below the five-year average this summer.

Lower-48 state dry gas production Monday was 105.9  bcf/day (+6.8 y/y), according to BNEF.  Lower-48 state gas demand Monday was 64.8 bcf/day (+4.3% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 15.6 bcf/day (+5.5% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended April 19 rose +2.1% y/y to 72,587 GWh (gigawatt hours), and US electricity output in the 52-week period ending April 19 rose +3.7% y/y to 4,249,233 GWh.

In a bullish longer-term factor for nat-gas prices, President Trump lifted the Biden administration's pause on approving gas export projects in January, thus moving into active consideration a backlog of about a dozen LNG export projects.  Increased US capacity for exporting LNG would boost demand for US nat-gas and support nat-gas prices.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended April 18 rose +88 bcf, above expectations of +75 bcf and well above the 5-year average build for this time of year of +58 bcf.  As of April 18, nat-gas inventories were down -20.2% y/y and -2.3% below their 5-year seasonal average, signaling tight nat-gas supplies.  In Europe, gas storage was 38% full as of April 22, versus the 5-year seasonal average of 48% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending April 25 rose +1 to 99 rigs, modestly above the 4-year low of 94 rigs posted on September 6, 2024.  Active rigs have fallen since posting a 5-1/2 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).