Natural Gas Price Fundamental Daily Forecast – Supported by LNG Exports, Capped by Weather Forecast

Natural gas futures are inching higher on Wednesday with buyers a little tentative as they try to navigate through an important resistance zone. Taking out the upside of the zone at $2.819 could lead to an acceleration into the psychological $3.00 level, followed by $3.256. While a trade through the lower level at $2.685 could trigger the start of a near-term correction.

At 13:16 GMT, April Natural Gas is trading $2.765, up $0.018 or +0.66%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $9.14, up $0.18 or +2.01%.

Prices rose on Tuesday to a fresh one-month high on a monthly drop in gas output and an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants.

But the market may be facing some headwinds on forecasts calling for less cold and lower heating demand over the next two weeks than previously expected.

Underpinned as LNG Exports Rise

Freeport LNG, the second-biggest U.S. LNG export plant, was on track to pull in about 0.8 billion cubic feet per day (bcfd) of gas from pipelines for a third day in a row on Tuesday, according to data provide Refinitiv.

Freeport LNG said last week that the plant could be consuming about 2.0 bcfd of feedgas “over the next several weeks.” Some analysts, however, have said Freeport LNG will likely not return to full capacity until the end of April.

The total amount of gas flowing to all the big U.S. LNG export plants jumped to 12.8 bcfd so far in February from 12.3 bcfd in January. That is just shy of the monthly record of 12.0 bcfd set in March 2022 before Freeport LNG shut. The seven big U.S. LNG export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG, Reuters reported.

Lower Production Providing Support

Refinitiv said average gas output in the U.S. Lower 48 states has dropped to 97.5 bcfd so far in February from 98.3 bcfd in January. That compares with a monthly record of 99.8 bcfd in November 2022.

Analysts blamed the production decline on the recent drop in gas prices in December and January that caused several energy firms to reduce plans to drill for more gas. In addition, extreme cold earlier in February also cut gas output by freezing oil and gas wells in several producing basins.

Short-Term Weather Outlook

According to NatGasWeather for March 1-7, “Mild to warm conditions will rule much of the southern and eastern halves of the U.S. through Thursday with highs of 60s to 80s for light national demand, although still cool to cold across the western and far northern U.S. as weather systems bring rain, snow, and highs of 20s to 50s.

Colder temperatures will spread eastward to cover the northern 2/3 of the U.S. Friday-Sunday with lows of 0s to 30s for slightly stronger national demand.

Short-Term Outlook

Trader reaction to the retracement zone at $2.685 to $2.819 is likely to determine the near-term direction of the April natural gas futures contract. Look for the short-covering rally to possibly extend into $3.000 to $3.256 on a sustained move over $2.819. Watch for weakness on a sustained move under $2.685.