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Nat Gas Specs Cut Long Positions as Demand Season Nears End

By:
James Hyerczyk
Published: Mar 21, 2022, 18:23 UTC

The price action suggests LNG demand is currently providing just enough support to offset the expected drop in demand next week.

Natural Gas

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Natural gas futures are trading flat late Monday after recovering from an early session setback. Prices were pressured on rising output and forecasts for milder weather and lower heating demand next week than previously expected.

Despite the late session rebound, traders believe prices could be capped over the near-term amid meteorologists’ forecasts calling for milder than normal weather through at least early April, which should keep heating demand low and allow utilities to start injecting gas into storage this week – about a week earlier than usual.

At 17:54 GMT, May natural gas futures are trading $4.912, up $0.010 or +0.20%. The United States Natural Gas Fund ETF (UNG) is at $17.14, down $0.08 or -0.47%.

Prices likely bounced back as global demand for gas to replace Russian fuel after its invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over U.S. futures. Russia is the world’s second-biggest gas producer after the United States.

Daily May Natural Gas

Volume Drops as US Gas Speculators Trim Positions

With the winter heating season coming to an end, U.S. gas speculators last week cut their net long futures and options positions on the NYMEX and Intercontinental Exchanges for a sixth week in a row to their lowest since June 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

That demand decline cut interest in trading gas, causing total U.S. gas futures volume on the NYMEX to drop to 183,230 contracts on March 18, the lowest since December 2015. That compares with a daily average of 378,160 contracts traded over the past year.

Average Gas Output to Rise, Average Gas Demand to Fall Next Week

Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.2 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December.

With the coming of slightly cooler weather next week, Refinitiv projected average U.S. gas demand, including exports, would rise from 96.7 bcfd this week to 97.6 bcfd next week. The forecast for next week, however, was lower than Refinitiv’s outlook on Friday.

Short-Term Outlook

The price action suggests LNG demand is currently providing just enough support to offset the expected drop in demand next week.

However, we suspect some buyers are speculating Russia will cut off supplies of natural gas to Europe if European Union (EU) nations join the United States in a Russian oil embargo.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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