Natural Gas Slumps to Three-Month Low: Is the Bottom in Sight?

The U.S. natural gas market has been buffeted by a mix of seasonal demand shifts and structural supply dynamics, sending prices to near three-month lows. As of April 16, the Henry Hub spot price dipped to $3.21/MMBtu, its lowest level since mid-January, reflecting a 22-cent decline week-over-week. This drop underscores a fragile equilibrium between weakening spring demand and lingering concerns over storage deficits and export growth. But is this the bottom, or are further declines ahead? Let’s break down the data.

The Demand Dilemma: Cooler Weather vs. Seasonal Slump

Spring 2025 has presented a paradox for natural gas demand. While colder-than-normal temperatures in the central U.S. spurred a 9% weekly increase in consumption to 108.8 Bcf/day, this uptick was insufficient to offset broader seasonal softness. The EIA notes that spring demand typically declines as heating needs wane, and the electric power sector’s gas use fell 5.4% week-over-week—though it remains 5% higher year-over-year.

The power sector’s reliance on natural gas continues to grow, accounting for 41% of total U.S. consumption in 2024, but its volatility complicates price forecasts. Analysts caution that cooling temperatures in regions like the Pacific Northwest—where the Sumas price spiked to $1.82/MMBtu—could create regional disparities, while national demand remains constrained by milder weather patterns.

Supply Constraints and Storage Deficits

On the supply side, the market faces a dual challenge: reduced drilling activity and storage levels below the five-year average. The natural gas rig count has dropped to 97 rigs—a 34-rig decline from April 2024—as producers cut costs amid price volatility. Meanwhile, the EIA’s April 11 storage report revealed 16 Bcf of injections, far below the 50 Bcf five-year average. Total working gas stocks now stand at 1,846 Bcf, 74 Bcf below average, reflecting heavy winter withdrawals and constrained Canadian imports.

This deficit could support prices as the injection season progresses. The EIA projects storage levels will end October at 3,660 Bcf, 3% below the five-year average, suggesting a tighter market heading into winter.

Export Growth: A Double-Edged Sword

U.S. LNG exports remain a key bullish factor. In the week ending April 16, exports averaged 16.8 Bcf/day, with new terminals like Plaquemines and Corpus Christi ramping up capacity. This could push 2025 exports past the EIA’s 15.2 Bcf/day forecast, driven by flexible destination contracts that redirect cargoes to Asia amid geopolitical shifts. However, risks persist: China’s reduced U.S. LNG imports—likely due to trade tensions—highlight the fragility of global demand.

The Price Outlook: Bearish Near-Term, Bullish Long-Term?

Despite the current slump, the EIA forecasts an average price of $4.30/MMBtu in 2025 and $4.60/MMBtu in 2026, citing production limits and rising global demand. For investors, the question is whether the market will stabilize near $3.20/MMBtu or test lower levels.

Investment Takeaways

1. Bearish Triggers: Further storage injections above forecasts, a sustained warm weather trend, or a collapse in LNG demand could push prices lower.
2. Bullish Catalysts: A colder-than-expected summer boosting power sector demand, delays in new LNG export capacity, or geopolitical disruptions in Europe or Asia.
3. Storage Dynamics: The deficit implies a floor for prices, but investors should monitor weekly injection reports closely.

Conclusion

Natural gas’s plunge to near $3.20/MMBtu reflects a confluence of weak spring demand and oversupply concerns. Yet, structural factors—storage deficits, rising LNG exports, and a rig count at decade lows—suggest the market may not stay depressed for long. The EIA’s $4.30/MMBtu annual average for 2025 is a reasonable baseline, but volatility will persist. For traders, short-term dips could present buying opportunities, while long-term investors should focus on companies with low production costs and exposure to export terminals. The key takeaway: natural gas may have hit bottom, but the path to recovery will be bumpy.

In a market where storage and weather rule, staying nimble—and data-driven—is essential.