Natural Gas Forecast: Prices Fall on Record-Breaking US Gas Output

Natural Gas Highlights

• November 2023 premium over October 2023 hits historic high
• US gas output reaches new record of 101.3 bcfd
• Warmer weather forecast leads to lower gas demand

Natural Gas Overview

On Tuesday, U.S. natural gas futures are experiencing a downward trend. This follows a decline of approximately 4% in the previous session. This drop was due to the forecast of milder weather and reduced heating demand next week, which were not as severe as initially anticipated, coupled with record output levels. In contrast, on Friday, the same futures contract increased by approximately 2%, closing at its highest level since March 16th.

At 12:00 GMT, Natural Gas is trading $2.1305, down $0.0255 or -1.18%. On Monday, the United States Natural Gas Fund ETF (UNG) settled at $6.76, down $0.25 or -3.57%.

November 2023 Premium Hits Historic High

Looking forward, the premium of the November 2023 contract over the October 2023 has reached a historic high of 46 cents. This spread between October and November is often used by the industry to speculate on winter weather forecasts, as October is the final month of the summer cooling season when gas is typically stored.

US Gas Output Hits New High

Refinitiv, a data provider, has reported that the average gas output in the Lower 48 states of the United States reached a new high of 101.3 billion cubic feet per day (bcfd) in April, surpassing the previous record of 100.5 bcfd set in March.

US Weather to Turn Warmer

Meteorologists have predicted that the weather in the Lower 48 states will transition from colder-than-normal to near-to-warmer-than-normal between May 1st to 5th and May 6th to 16th.

US Gas Demand to Decrease

With the weather expected to turn seasonally warmer, Refinitiv has forecasted that U.S. gas demand, including exports, will decrease from 95.6 bcfd this week to 91.0 bcfd next week. This forecast is lower than Refinitiv’s outlook on Friday.

Record US Gas Flows Reported

According to Refinitiv, gas flows to the seven largest U.S. LNG export plants have increased to a new high of 14.0 bcfd in April. This is exceeding the prior record of 13.2 bcfd set in March. However, the output is higher than the plants’ capacity to convert gas to LNG, which is limited to 13.8 bcfd, as some of the fuel is utilized to power the equipment used in the production of LNG.

Technical Analysis

At present, Natural Gas is trading below the pivot point of $2.168.  This indicates  new resistance level from a daily technical perspective. If the market manages to sustain a move above this pivot, it may suggest that the buying pressure is increasing, potentially leading to a surge towards the resistance level (R1) at $2.432 in the near term.

Conversely, if the price continues to trade below the pivot, it could signal the presence of sellers, which may result in a near-term decline towards the support level (S1) at $1.962.

The current price action suggests that investors are searching for a catalyst to propel the market higher. However, this is proving challenging during the shoulder season when the weather is moderate, neither too hot nor too cold.

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