Natural Gas News: Prices Stabilize as Colder Weather Spurs Increased Demand

U.S. Natural Gas Market Overview

U.S. natural gas futures remained stable on Wednesday, following a notable increase the day before. This rise was spurred by colder weather forecasts and an anticipated surge in heating demand.

At 12:34 GMT, US Natural Gas is trading $1.747, up $0.003 or +0.17%.

Weather Impact on Demand

Current weather patterns, characterized by colder temperatures in the northern U.S., are expected to drive moderate demand for natural gas over the next week. This shift comes after seven weeks of substantially lower-than-normal demand. The increased need for heating due to cooler weather in the north and central U.S. through March’s end is set to intensify demand. However, this may be somewhat mitigated by a strong upcoming performance in wind energy generation.

Production and Supply Trends

A key factor supporting futures is the continued decline in U.S. gas output, which dipped to a three-and-a-half-year low in February. This decrease is linked to collapsed gas prices and reduced drilling activities by major energy firms. Additionally, the potential resumption of operations at one of Freeport LNG’s liquefaction trains in Texas is expected to heighten demand, further influencing prices.

Storage and Price Fluctuations

Natural gas stockpiles are currently estimated to be about 40% above typical levels, a result of near-record output and reduced winter demand. The low prices experienced recently are projected to drive record U.S. gas consumption in 2024, though they are also anticipated to curtail production for the first time since the 2020 COVID-19 pandemic.

Weather and Production Influencing Gas Futures

Looking ahead, the financial firm LSEG notes a decline in gas output in the lower 48 U.S. states for March. In contrast, gas demand, inclusive of exports, is forecasted to rise slightly. Analysts are monitoring the potential full return to service of Freeport LNG’s Texas plant, which could significantly impact U.S. LNG feedgas levels.

Market Forecast

In the short term, the U.S. natural gas market is leaning towards a bullish outlook. The confluence of rising demand due to cooler weather, a decrease in production, and the potential increase in LNG export capacity positions the market for an uptick in prices and demand. However, the strong performance in alternative energy sources like wind and the high levels of gas in storage could moderate these bullish trends.

Technical Analysis

U.S. Natural Gas futures are consolidating for a sixth session on Wednesday. The daily chart indicates the short-term trend could turn higher if the buying is strong enough to take out $1.774.

If the upside momentum shifts enough on the move, there is an outside chance of a strong surge into the 50-day moving average at $1.991. Although we expect sellers to re-emerge on a rally into this important moving average, the intermediate trend could turn up if it is taken out with conviction.

On the downside, major support remains $1.643 to $1.607.