Natural Gas Forecast: EIA Reports Higher-than-Anticipated Storage Build

Natural Gas Highlights

• Natural gas weakens despite record LNG exports
• U.S. EIA reports higher-than-anticipated storage build
• Refinitiv data reveals increase in average gas flows to major LNG export plants

Natural Gas Overview

In early Friday trading, natural gas is weakening in a lackluster trade following Thursday’s 2% climb to a one-week high in U.S. natural gas futures, as traders shifted to the June contract. Despite this, the volume of gas being transported to U.S. liquefied natural gas (LNG) export plants is expected to reach a record high for the second consecutive month.

However, this price hike occurred despite predictions of relatively stable temperatures and demand over the next two weeks, as well as a larger-than-anticipated storage build last week, when mild weather suppressed gas heating demand.

At 02:36 GMT, Natural Gas is trading $2.171, down 0.005 or -0.21%. On Thursday, the United States Natural Gas Fund ETF (UNG) settled at $6.89, up $0.13 or +1.92%.

U.S. Gas Storage Exceeds Expectations

According to the U.S. Energy Information Administration (EIA), utilities injected 79 billion cubic feet (bcf) of gas into storage for the week that ended on April 21. This exceeded the 75-bcf increase predicted by analysts in a Reuters poll, and was notably higher than the 42 bcf increase in the same week the previous year, as well as the average increase of 43 bcf for the five-year period from 2018 to 2022.

Record Flows to US LNG Plants

Refinitiv, a data provider, reported that the average gas flows to the seven major U.S. liquefied natural gas (LNG) export plants have increased to 14.0 billion cubic feet per day (bcfd) in April, surpassing the record of 13.2 bcfd set in March. Although these plants can convert roughly 13.8 bcfd of gas into LNG, they are capable of taking in slightly more gas than they can convert into LNG, as some of the fuel is utilized to power the equipment involved in producing LNG.

US Gas Futures Trail Global Prices

Because the United States is the largest producer of fuel globally and has ample supply for domestic consumption, U.S. gas futures are currently trailing behind global prices. However, the country faces limitations on its LNG exports due to capacity constraints.

US Gas Production Rises Again

According to Refinitiv, gas production in the Lower 48 states has increased to 100.4 billion cubic feet per day (bcfd) in April, surpassing March’s 99.7 bcfd and nearing the monthly record of 100.5 bcfd in January.

Gas Markets React to Unstable Weather

Meteorologists predict a shift in weather patterns from near-normal conditions between April 27-29 to colder-than-normal weather from April 30-May 7, followed by a return to near-normal to warmer-than-normal conditions from May 8-12. As the weather becomes more seasonally warm,

Refinitiv: US Gas Demand Decreases

Refinitiv anticipates a decline in U.S. gas demand, including exports, from 99.3 bcfd this week to 94.7 bcfd next week.

Technical Analysis

Looking at Natural Gas from a daily technical perspective, it is currently trading below the pivot point of $2.353. However, if it manages to surpass this level, it could indicate a show of strength and potentially prolong the rally in the short term, pushing it towards R1 at $2.727. On the other hand, a consistent dip below the pivot point could suggest the presence of sellers in the market. This, in turn, could generate downward momentum, potentially leading to a challenge of S1 at 1.695.

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