Mild Weather and Strong Output Leaves Natural Gas Futures Prices in Limbo

Highlights

• May contract moves to front, leaving natural gas futures to drop by 0.24%.
• EIA reports lower-than-expected natural gas for the week ended March 24
• Despite lower-than-expected draw in latest report, natural gas inventories remain comfortable.

Overview

Natural gas futures are inching lower on Friday as the May contract moved to the front of the curve for the first time yesterday. On Thursday, prices were down following a discouraging government storage report that confirmed apprehensions regarding the supply/demand imbalance as shoulder season approaches.

At 11:30 GMT, May Natural Gas futures are trading $2.099, down 0.005 or -0.24%. On Thursday, the United States Natural Gas Fund ETF settled at $6.67, down $0.23 or -3.33%.

Natural Gas Futures Drop 2% on Rising Output and Milder Weather Predictions

Natural gas production remained above 100 Bcf/d on Thursday, which has been the case for most of 2023, while weather forecasts indicated that the conditions will continue to be mild in April.

The strong output and mild weather have prevented inventory buildup in the first quarter of the year. However, the latest report from the U.S. Energy Information Administration showed a withdrawal from storage that was lower than expected, leaving stocks at above-average levels.

US natural gas futures fell by 2% on Thursday due to rising output and forecasts for milder weather next week, which would allow utilities to begin injecting gas into storage at the beginning of April.

NatGasWeather’s Short-Term Outlook

From March 30 to April 5, much of the United States will experience cool weather conditions, with low temperatures ranging from the 0s to 20s in the northern parts of the country and 30s and 40s in the southern areas.

California will continue to experience rain and snow. The coldest temperatures will be felt in the Rockies and N. Plains, with high temperatures ranging from the 20s to 30s.

The rest of the northern US will experience milder temperatures, with high temperatures ranging from the 40s to 60s.

Later this week and again next week, warm weather conditions will dominate in the southern and eastern parts of the US, with high temperatures ranging from the 60s to 80s.

As a result, there will be moderate to light national demand for energy. Demand is expected to be moderate to high today and then gradually decrease to moderate to low throughout the week.

US Natural Gas Inventories Remain Comfortable

The US Energy Information Administration (EIA) reported a natural gas draw of 47 billion cubic feet (Bcf) for the week ended March 24, which was lower than the median draw estimates in the 50s Bcf from polls and NGI’s modeled 57 Bcf withdrawal.

However, the result was higher than the five-year average of 17 Bcf due to late winter weather in the Upper Midwest. Despite this, inventories were still comfortable at 1,853 Bcf, higher than the year-earlier level of 1,411 Bcf and the five-year average of 1,532 Bcf.