Natural Gas News: Stockpile Surplus, Weather Trends Weigh on Prices

Natural Gas Market Weakens

U.S. natural gas futures reached a 3-1/2-year low, influenced by forecasts predicting milder weather and reduced heating demand. The expiry of the April futures contract and decreased gas flows to LNG export plants, notably due to ongoing work at Texas’s Freeport LNG plant, further pressured prices. These developments have led to a significant reduction in weather-driven natural gas demand, potentially extending the current period of price weakness.

At 12:48 GMT, Natural Gas Futures are trading $1.751, down $0.037 or -2.07%.

Stockpiles and Production Trends

As of now, natural gas stockpiles are about 41% above the typical levels for this time of year. Despite this surplus, U.S. gas usage is expected to hit a record high in 2024, with production possibly declining for the first time since 2020. This decrease in output, estimated at around 3% over the past month, is attributed to reduced drilling activities by major energy firms like EQT and Chesapeake Energy.

Supply and Demand Factors

March saw a decrease in gas output in the Lower 48 U.S. states, averaging 100.2 billion cubic feet per day, a drop from February’s 104.1 bcfd. Meteorologists predict mostly colder than normal weather through April 10, but with the approach of warmer weather, gas demand, including exports, is expected to decrease. The flow of gas to major U.S. LNG export plants also diminished in March, and analysts do not foresee a return to peak levels until all Freeport LNG plant trains are operational.

Weather Forecasts Impact

The latest weather data indicates only minor changes, with a trend towards warmer conditions. Most notably, the April 5-10 weather pattern is expected to be warmer than necessary to drive significant demand. The period from March 27 to April 2 will see moderate demand due to a cool front, but demand is projected to lighten as temperatures rise towards the weekend.

Short-Term Market Forecast

Given the current trends in weather forecasts, stockpiles, and production, the natural gas market faces a bearish short-term outlook. Prices may continue to be pressured by the surplus in storage and the approaching lower-demand spring season. Additionally, the ongoing limitations in LNG export capacity could further contribute to this downward trend in prices.

Technical Analysis

Natural Gas futures are trading lower for the sixth straight session on Wednesday. We expect to see a closing price reversal bottom inside the 7 – 10 day from the March 19 top.

The main trend is down. A trade through $1.948 will change the trend to up. Until then watch for the reversal or a support base to be build before considering the long side.