Natural Gas News: Lower Amid Supply Surplus, Weather Trends, Production Drop

James Hyerczyk
Published: Apr 12, 2024, 13:35 GMT+00:00

Key Points:

  • Natural gas futures down for third consecutive session.
  • EIA reports significant storage build, exceeding forecasts.
  • Production declines as LNG export demand drops.
Natural Gas News

In this article:

Supply and Demand Concerns

U.S. Natural Gas futures are down for a third consecutive session on Friday, signaling a potential test of multi-year lows in the near future. This trend is driven by larger than expected increases in storage and subdued demand forecasts, reflecting a bearish outlook in the market.

At 13:24 GMT, Natural Gas futures are trading $1.756, down $0.008 or -0.45%.

Recent Price Movements

On Thursday, natural gas futures fell by approximately 5% due to a significant storage build reported by the U.S. Energy Information Administration (EIA). The EIA’s report revealed a 24 billion cubic feet (bcf) increase in storage for the week ending April 5, surpassing analysts’ expectations of an 8-bcf rise and aligning with the five-year average. This development contributed to a sharp price drop, with May delivery futures closing at $1.798 per million British thermal units (mmBtu).

Weather Impact and Demand Fluctuations

The weather forecast for the upcoming week shows comfortable temperatures across the U.S., with light demand expected to continue. NatGasWeather highlighted cooler trends for April 19-23, which may slightly bolster prices, but the overall demand outlook remains weak. The expected light demand for the period of April 24-27 further compounds the bearish sentiment.

Supply Factors

Production declines have also been noted, with gas output in the Lower 48 U.S. states averaging 98.9 billion cubic feet per day (bcfd) in April, down from 100.8 bcfd in March. This reduction in output coincides with decreased gas flows to major U.S. liquefied natural gas (LNG) export plants, particularly the Freeport LNG plant in Texas, which reported a drop in feedgas following operational issues.

Short-Term Market Forecast

Given the current trends of increased storage levels, declining production, and weaker demand, the outlook for natural gas prices remains bearish in the short term. Market participants should brace for continued downward pressure on prices as the supply outweighs the subdued demand.

Technical Analysis

Daily Natural Gas

US Natural Gas futures are headed lower on Friday after a steep sell-off the previous session. The weak price action suggests the market could be headed into March low at $1.686.

The week started out promising for the bulls, but it was all a trap as sellers waited above to defend the 50-day moving average at $1.947. The move solidified the importance of this intermediate trend indicator as resistance, but also flagged it as the trigger point for an acceleration to the upside.

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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