Nat Gas Gains Capped by Forecasts for Lower Heating Demand

Natural gas futures are edging higher on Wednesday after clawing back earlier losses. Traders are trying to recover from yesterday’s steep decline that was fueled by optimism over a potential peace deal between Russia and Ukraine.

Additionally, prices were pressured by a drop in U.S. crude futures and on forecasts for milder weather and lower heating demand over the next two weeks than previously expected. This is likely to encourage utilities to inject gas into storage next week.

At 10:33 GMT, May natural gas futures are trading $5.375, up $0.045 or +0.84%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $18.61, down $0.61 or -3.17%.

Short-Term Weather Outlook

According to NatGasWeather for May 30 to April 4, “Strong national demand this morning as frosty air lingers across the Great Lakes and Northeast with lows of 0s to 30s, highs 30s to 50s.

Texas and the Plains will be very warm with highs of 70s to lower 90s, while nice over the South and Southeast with highs of 60s to 80s.

The West/Mountain West will be unsettled with highs of 50s to 70s. A warm break will set up over the eastern half of the U.S. Wednesday through Thursday with highs of 50s to 70s for lighter national demand.

However, a slightly cool weather system with rain and snow will track across the Midwest and Northeast this weekend with lows of 10 and 30s for a minor bump in national demand.”

Latest Output, Demand Figures

Data provider Refinitiv said average gas output in the U.S. lower 48 states was up 93.4 bcfd so far in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing over the winter. That compares with a monthly record of 96.2 bcfd in December.

Refinitiv projected average U.S. gas demand, including exports, would drop from 105.1 bcfd this week to 96.5 bcfd next week as the weather turns seasonally milder. Those forecasts were lower than Refinitiv’s outlook on Monday.

Liquefied Natural Gas Exports Rise in March

The amount of gas flowing to U.S. LNG export plants has risen to 12.88 bcfd so far in March from 12.43 bcfd in February and a monthly record 12.44 bcfd in January. The United States can turn about into LNG. The rest of the gas flowing to the plants is used to operate the facilities.

Traders said U.S. LNG exports would remain near record levels for as long as global gas prices trade well above U.S. futures as utilities around the world scramble for cargoes to meet surging demand in Asia and replenish low inventories in Europe, especially with the threat Russia could cut European supplies.

Short-Term Outlook

The April futures contract expiration came and went without much fanfare. Although some speculators are reacting to Russian/Ukraine developments, the primary focus remains on nearby demand headed into shoulder season.

With weather demand waning, Bespoke looks for the first storage injection of the season on Thursday with the U.S. Energy Information Administration’s (EIA) next print. The report will cover the week ended March 25. Bespoke projected a storage increase of 22 Bcf, in line with expectations for a modest increase found by a preliminary Reuters poll.