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Natural Gas News: Prices Stabilize Despite Supply Challenges

By:
James Hyerczyk
Published: Apr 20, 2024, 07:21 GMT+00:00

Key Points:

  • Futures settle flat despite complex supply-demand interplay.
  • Significant production cuts by EQT, Chesapeake Energy.
  • Cooler weather to boost demand, tighten supply soon.
Natural Gas News

In this article:

Stable Amid Supply and Demand Fluctuations

U.S. natural gas futures finished flat on Friday, the victim of a complex interplay of supply and demand fundamentals. Despite fluctuations in spot prices and output, forecasts for increased demand due to cooler weather stabilized prices.

On Friday, Natural Gas Futures settled at $2.176, down $0.050 or -2.25%.

Recent Market Movements

Natural gas futures remained relatively unchanged recently, balancing concerns of an oversupplied market against prospects of rising demand. Current gas stockpiles are approximately 35% above typical levels for this season, reflecting an ongoing surplus.

Production and Drilling Insights

Significant production decreases are influencing market sentiments. U.S. gas output has declined about 10% in 2024, with major producers like EQT and Chesapeake Energy scaling back activities due to low prices. The number of operational gas rigs has dropped to its lowest since December 2021, signaling a cautious approach from the drilling sector.

Spot Market Conditions

In the spot market, several states including Texas, California, and Arizona have seen power and gas prices drop below zero multiple times this spring. This trend is driven by low demand, abundant renewable energy supply, and logistical challenges caused by pipeline maintenance.

Supply and Demand Forecast

April has recorded a drop in gas output in the Lower 48 U.S. states, with a notable reduction in liquefied natural gas (LNG) feedgas flows to export plants. Despite this, an uptick in gas demand is anticipated, fueled by cooler-than-average weather expected to persist until the end of the month. According to NatGasWeather, weather across the Lower 48 states will remain mostly colder than normal through April 26 before turning warmer than normal from April 27-May 4, enhancing heating demand and potentially tightening the supply-demand balance.

Short-Term Market Forecast

Looking ahead, the U.S. natural gas market appears set for a bullish trend in the short term. As temperatures rise post-April, alongside a rebound in LNG feedgas flows, demand is expected to strengthen. This could mitigate some of the current oversupply, potentially stabilizing or increasing prices in the coming weeks.

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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