Natural Gas News: Futures Tumble Amid Warm Weather and Low Demand

U.S. natural gas futures are experiencing a notable decline on Monday, influenced by weather conditions and market trends.

At 13:11 GMT, Natural Gas futures are trading $1.768, down $0.037 or -2.05%.

Weather Impact and Demand

Recent weather patterns, especially warmer-than-expected temperatures, have significantly impacted natural gas demand. NatGasWeather is forecasting mild conditions across most of the U.S. for March 11-17, leading to very low demand. These conditions are expected to persist, with only a temporary spike in demand anticipated around March 17-20 due to colder weather.

Storage and Supply Data

According to the U.S. Energy Information Administration (EIA), there was a meager 40 billion cubic feet (bcf) withdrawal from natural gas storage last week. This figure is considerably lower than last year’s 72 bcf and below the five-year average of 93 bcf. The warmer weather and reduced demand have contributed to this decline.

Production Cuts

In response to the falling prices, major industry players have slashed production. Output in the Lower 48 states dropped to around 100.2 billion cubic feet per day (bcfd), a decrease from February’s 104.1 bcfd average. Chesapeake Energy plans a 30% reduction in 2024 production, and EQT has curtailed nearly 1 bcfd of production through March.

LNG Export Challenges

The natural gas market is also facing difficulties in the LNG export sector. The outage at the Freeport LNG facility in Texas has reduced gas flow to export plants, exacerbating the oversupply domestically. Although the facility’s operation is expected to resume by mid-March, this remains uncertain.

Rig Count and Production Outlook

The latest Baker Hughes report indicates a reduction in the number of operational oil and natural gas rigs to 622, a 16.6% decrease year-over-year. This drop in drilling activity reflects the industry’s cautious approach due to lower natural gas prices and increased operational costs.

Market Forecast

Considering high storage levels, production cuts, and challenges in the LNG export sector, the short-term outlook for the U.S. natural gas market is bearish. Prices are expected to continue their downward trend, influenced by current market conditions. Traders should monitor weather forecasts and LNG export developments closely for potential market changes.

Technical Analysis

Natural gas futures are underpressure on Monday with the market testing the 50% to 61.8% retracement zone of the $1.607 to $2.009 trading range at $1.808 – $1.760. Trader reaction to this area c ould set the tone for the week.

Aggressive counter-trend buyers are going to view this zone as value and may try to build a new support base. Bearish trend traders are going to use this area as temporary stopping ground ahead of another drive into the multi-year low at $1.607.