Natural Gas News: Prices Surpressed by Soft Demand Despite Production Shortfalls

U.S. Natural Gas Futures Trend Lower Amid Bearish Fundamentals

U.S. natural gas futures continued their downward trend on Wednesday, failing to sustain the slight gains from the previous day. Despite the market being technically oversold, fundamental indicators maintain a bearish outlook. Some traders anticipate a potential short-covering rally, although this is viewed skeptically by experts who dismiss it as coincidental with traditional indicators like the Relative Strength Index (RSI).

At 13:06 GMT, Natural Gas is trading $1.699, down $0.033 or -1.91%.

Market Analysis

Currently, natural gas prices are suppressed due to a combination of soft weather forecasts and operational disruptions at key LNG facilities, which have reduced demand for feed gas. On Tuesday, front-month gas futures for April delivery slightly rose by 4.1 cents to $1.732 per mmBtu, after reaching a three-week low. The price recovery was minimal, reflecting persistent supply overhangs and weak demand.

Supply and Demand Trends

In April, U.S. gas output decreased, with the daily average falling to 97.3 billion cubic feet from 100.8 billion cubic feet in March. The forecast for the coming week suggests a further decline in demand to 91.0 billion cubic feet per day. The ongoing outage at the Freeport LNG plant significantly contributes to this reduced demand, operating at merely 5% of its capacity.

Weather Impact and Demand

The NatGasWeather forecast indicates varied weather patterns across the U.S., with colder systems expected to bring rain and snow in northern and central regions from Friday to Monday. This might lead to a temporary spike in demand due to heating needs. However, overall demand is projected to be light until Thursday, turning to high only by the end of the week.

Short-Term Market Forecast

The bearish sentiment in the natural gas market is likely to persist, given the surplus supply and muted demand levels. Prices may see limited downward movement in the near term, potentially stabilizing around the $1.70 mark, as predicted by energy advisory Ritterbusch and Associates. The ongoing operational constraints at LNG facilities and the anticipated low demand are expected to keep prices at bay, reinforcing a bearish outlook for the market.

Technical Analysis

Natural gas futures are drifting lower on Wednesday as traders attempt to stabilize the prevailing downtrend.

The daily chart suggests continued downside pressure with the trend not likely to turn up until buyers overtake the 50-day moving average at $1.910.

Some traders believe the market is oversold and can turn higher on short-covering at any time, however, it is going to take “real” buying to change the trend into an intermediate or long-term uptrend.