Natural Gas News: Storage Surge Signals Bearish Outlook

Natural Gas Market Trends

In early Friday trading, US natural gas futures are lower, signaling a possible third straight day of weaker prices, yet the market has held a slight gain over the week. Current pricing is near the lows of last week ($1.643) and February ($1.607).

At 13:26 GMT, US Natural Gas is trading $1.666, down $0.017 or -1.01%.

Weather and Renewable Energy Impact

Current weather patterns, as reported by NatGasWeather, include normal to slightly higher Home Heating Degree Days (HDDs). However, strong wind energy generation, potentially hitting record levels next week, is impacting natural gas demand. The forecast from March 22-28 shows mixed conditions across the US, pointing to moderate overall demand for natural gas.

Supply and Inventory Analysis

Closing lower on Thursday, natural gas prices reflected the strong supply position in the US market. The EIA report for March 15, 2024, underscored this, revealing natural gas inventories 41.0% above the five-year average — the highest surplus in close to eight years. Specifically, storage levels were at 2,332 billion cubic feet (Bcf), up by 411 Bcf from last year and 678 Bcf more than the five-year average of 1,654 Bcf. This data illustrates a well-supplied market, with increased inventories likely due to reduced heating demand from the mild winter and improved efficiency in energy usage across various sectors.

External Factors and Price Trends

The year’s mild winter has led to a pronounced decline in natural gas prices, with reduced heating demand playing a significant role. The ongoing El Nino pattern, likely to sustain warmer temperatures, is further diminishing demand. Additionally, the Freeport LNG export terminal’s operational disruptions have curtailed US exports, adding to the domestic supply.

Production and Consumption Overview

Recent data shows a modest increase in dry gas production compared to last year, alongside a notable rise in gas demand. Yet, reduced electricity output in the US suggests a drop in natural gas demand from utilities.

Market Forecast

Given the extensive inventory levels, combined with the impact of milder weather and export limitations, the US natural gas market’s short-term perspective is predominantly bearish. The abundance of supply, coupled with the variability in demand due to weather changes and reduced utility consumption, points to a continued downward trend in natural gas prices.

Technical Analysis

Depending on whether you are a bear or a bull, natural gas is either distributing for another leg down, or consolidating ahead of a counter-trend rally. Given the b bearish fundamentals, it’s hard to think long, even at current price levels.

According to the daily chart, trader reaction to the static support at $1.696 is likely to set the tone today. On the brightside, overcoming $1.774 could start a strong short-covering rally with the 50-day moving average at $1.950 the first upside target.