Natural Gas News: Prices Fall Below $3.00 as Production Rises to 100 Bcf/d

James Hyerczyk
Updated: Jun 14, 2024, 19:09 GMT+00:00

Key Points:

  • Natural gas futures drop below $3 per MMBtu as production in the Lower 48 states rises to 100 Bcf/d. Increased supply data boosts bearish sentiment.
  • EIA reports working gas in storage at 2,974 Bcf, a net increase of 74 Bcf from last week, significantly above last year's figure and the five-year average.
  • Mountain Valley Pipeline, valued at $7.85 billion, is nearing operation. Regulatory approval is complete, but downstream pipeline constraints may limit summer capacity.
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Natural Gas Futures Fall Below $3 as Supply Data Draws Out Bears

Natural gas futures fell below $3 per MMBtu on Friday as production in the Lower 48 states surged back to 100 Bcf/d. The increased supply data, alongside a government storage report that met expectations, emboldened bearish sentiment in the market.

At 13:00 GMT, natural gas futures are trading $2.938, down $0.021 or -0.71%.

Supply and Storage Levels

The U.S. Energy Information Administration (EIA) reported that working gas in storage was 2,974 Bcf as of June 7, marking a net increase of 74 Bcf from the previous week. This storage level is significantly higher than last year’s figure by 364 Bcf and exceeds the five-year average by 573 Bcf. Pre-report estimates predicted a build of 73-75 Bcf, which is lighter than the five-year average of 89 Bcf. The current storage levels being above the five-year historical range contribute to the bearish outlook.

Weather and Demand Forecast

According to NatGasWeather, a hot ridge will dominate the southern two-thirds of the U.S. from June 14-19, bringing temperatures in the 90s and 100s, while the northern U.S. will experience milder weather with highs in the 70s and 80s. This weekend and the following week, much of the U.S. will see above-normal temperatures, driving high demand for natural gas. However, the cooler Northwest will see highs in the 60s to lower 80s, reducing demand in that region.

Mountain Valley Pipeline Nears Operation

The $7.85 billion Mountain Valley Pipeline (MVP), running from West Virginia to Virginia, is nearing operational status following regulatory approval. This 2.0 Bcf/d pipeline, which has faced numerous delays since 2018, is in its final preparation stages. Despite its expected contribution to increased supply, analysts from EBW Analytics caution that downstream pipeline constraints may limit the MVP from reaching full capacity during the summer.

Production Resumption

EQT, the largest gas producer in the U.S., has resumed production that was curtailed earlier this year. Some of this increased output is expected to flow through the MVP. However, the full impact on the market will depend on how quickly and efficiently this additional supply can be integrated into the existing infrastructure.

Market Forecast

Given the imminent operation of the MVP and substantial gas storage levels, the short-term outlook for natural gas is bearish. Although rising temperatures are expected to boost demand, the additional supply from the MVP and high storage levels are likely to suppress prices. Traders should keep a close watch on storage reports and pipeline developments for potential changes in supply.

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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