Natural Gas News: Futures Stabilize with European Demand Surge

Stability in Natural Gas Futures Amid European Market Activity

U.S. natural gas futures are exhibiting stability on Wednesday after a notable increase in the previous session. This steadiness is due to growing interest in the European gas market, especially from Asian countries, as recent price drops to multi-year lows have attracted a broader range of traders.

At 12:50 GMT, natural gas futures are trading $1.827, up $0.019 or +1.05%.

Recovery of U.S. Natural Gas from Recent Lows

In the United States, natural gas futures have bounced back after falling to their lowest levels in nearly four years. This recovery is primarily due to surplus inventories and high production levels, despite the mild weather conditions which have led to reduced demand. Robert DiDona of Energy Ventures Analysis pointed out that the unexpectedly warm weather from November through March contributed to lower than expected demand and higher storage volumes.

Insights on Production and Storage

According to LSEG, gas output in the U.S. increased to an average of 105.5 billion cubic feet per day (bcfd) in February, up from 102.1 bcfd in January, but still below the record high of 106.3 bcfd in December. Chesapeake Energy’s announcement of a 30% reduction in its 2024 production plan, which followed a significant price drop, led to a 13% price increase last week.

Impact of Weather on Price and Demand

Unusually high temperatures in the U.S. South have created an unseasonal cooling demand. Furthermore, forecasts predict summer-like temperatures across various U.S. regions, potentially affecting gas demand. Nonetheless, natural gas prices have decreased by more than 32% so far this year, largely due to a mild winter and persistent high production levels.

European Market and Increasing LNG Demand

The European benchmark for wholesale gas prices showed a slight reduction after previously recording gains. With ample supplies and milder weather, demand is expected to soften. Yet, global LNG demand is anticipated to increase in 2024, driven by growth in China and Europe. Thomas Maurisse from TotalEnergies noted that while China’s market is recovering, Europe’s increasing demand and limited short-term new supply capacities could keep a lid on prices temporarily and add to market volatility.

Short-term Market Forecast: Bullish Perspective

Given the rising global interest in European LNG, particularly from Asia, and the potential for a shift from coal to gas in power generation due to favorable price conditions, the short-term outlook for the natural gas market leans towards a bullish perspective. The expected demand surge from key consumers like China and Europe, combined with the production adjustments in the U.S., points to a tighter market balance, likely supporting an uptrend in prices shortly.

Technical Analysis

 

U.S. natural gas futures continue to build a support base on the daily chart. Given the width of this support area, we can project that a strong breakout over the recent top at $1.877 could trigger a surge into the 50-day moving average at $2.081 over the near-term.

On the downside, support for the near-term futures contract appears to be at $1.666 to $1.607.