Natural Gas Price Fundamental Daily Forecast – Questions Linger Over Future Demand GrowthThere is little demand growth left to support the gas market since most coal-to-gas fuel switching has already occurred and the power and industrial sectors were expected to consume less gas in coming months due to economic worries.
Natural gas prices tumbled nearly 3% on Friday, dragged down by another plunge in crude oil prices. Earlier in the week, natural gas fell to a 24-year low as steps taken to stop the spread of coronavirus cut into global economic growth and energy demand.
Traders noted that natural gas futures fell less than oil because gas demand is expected to rise next week as pipeline flows to liquefied natural gas (LNG) export terminals increase, Reuters reported.
On Friday, May natural gas settled at $1.675, down $0.051 or -2.95%.
Earlier in the week, the front-month gas futures for April delivery on the New York Mercantile Exchange fell 5.0 cents, or 3% to settle at $1.604 per million British thermal units, tying the September 1995 low hit on Wednesday. The all-time low for gas futures is $1.04 in January 1992. That put the front-month down over 14% this week, its biggest weekly decline since November, Reuters said.
Demand Worries Expected to Continue
“It is unclear how low the market can go if demand impacts are sustained for a significant period as currently seems possible,” Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report.
Myers noted there was little demand growth left to support the gas market since most coal-to-gas fuel switching has already occurred and the power and industrial sectors were expected to consume less gas in coming months due to economic worries.
Relief May Be on Its Way According to Refinitiv
Reuters reported on Friday that the premium of futures for May over April natural gas rose for a sixth session in a row, the most since February 2017, on expectations low energy prices will start to boost energy demand.
Even before the coronavirus started to spread, gas prices were already trading near their lowest in years as record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter.
Now with the coming of milder spring-like weather, data provider Refinitiv projected gas demand in the U.S. 48 states, including exports, would rise from an average of 104.3 billion cubic feet per day (bcfd) the week-ending March 20 to 104.7 bcfd the week-ending March 27 before falling to 103.4 bcfd the week-ending April 4. That compares with Refinitiv’s forecast Thursday of 104.2 bcfd this week and 103.0 bcfd the week after.