Natural Gas News: Tightening Supply-Demand Picture Boosting Prices

Futures Fluctuate Amid Mixed Signals

Natural gas futures experienced fluctuations as the market grappled with mixed signals from recent developments in LNG operations and storage levels. Despite an uptick in Freeport LNG feed gas flows and a bullish report on storage from the Energy Information Administration (EIA), futures drifted lower due to uncertainties in near-term weather demand and broader market trends.

At 13:29 GMT, Natural Gas Futures are trading $2.297, down $0.004 or -0.17%.

Impact of EIA Storage Report

The EIA’s latest weekly report showed a storage injection of 79 billion cubic feet (Bcf) for the week ending May 3, aligning closely with historical norms but falling below median expectations. This data, typically a bullish signal for natural gas markets, reflects a tighter supply-demand balance as storage levels exceed both last year’s figures and the five-year average significantly.

Freeport LNG Operations and European Storage

Operations at the Freeport LNG terminal have shown signs of ramping up, with recent activities suggesting near-capacity operation across multiple trains. This increase in LNG production, however, is tempered by scheduled maintenance at the Cameron terminal, impacting overall U.S. LNG output. In Europe, gas storage levels are robust at nearly 63% capacity, positioning the continent well for the ongoing injection season.

NGSA Forecasts Summer Gas Price Drop

Despite high storage levels and increased production, the Natural Gas Supply Association (NGSA) anticipates a decline in natural gas prices over the summer. This forecast is driven by a projected 1% increase in demand, mainly from power consumption and exports, which are expected to be offset by the production uptick. Furthermore, market analysts predict continued pressure on prices, with potential tightening in the supply-demand balance due to factors such as LNG feed gas demand and pipeline maintenance in the Permian Basin.

Short-Term Forecast

Looking ahead, the market is poised for potential bullish trends as the supply-demand balance tightens further. Analysts anticipate next week’s storage report to show an injection below seasonal norms, which could bolster natural gas prices in the short term. The expectation for the fall storage peak is set above 4 trillion cubic feet, indicating ample supply but also a well-balanced market that could support stable or increasing prices moving forward.

Technical Analysis

Natural gas is drifting lower on Friday after a weak follow-through to the upside earlier in the session failed to attract enough buyers to continue the move. The price action suggets the current rally is still being fueled mostly by short-covering and that some sellers are still in “sell the rally” mode.

Nonethless, holding above the 50-day moving average at $2.174 is a bullish sign since it represents a positive change in the intermediate trend.

If the upside momentum continues over the short-run, we’re targeting the March 5 top at $2.531.