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Natural Gas Price Fundamental Daily Forecast – Weak LNG Demand, Record Output to Weigh on Prices

By:
James Hyerczyk
Published: Sep 18, 2022, 09:12 UTC

Lower demand combined with record production levels in September have led traders to anticipate more robust storage injections as a result.

Natural Gas

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U.S. natural gas futures took a second straight hit on Friday amid worries over record domestic supply and easing global gas prices. U.S. prices fell despite forecasts calling for warm weather to persistent until the end of September, which will force power generators to keep burning heaps of gas to keep air conditioners purring for office and home cooling needs.

On Friday, November natural gas futures settled at $7.811, down $0.561 or -6.70%. The United States Natural Gas Fund ETF (UNG) finished at $26.94, down $1.72 or -6.00%.

Near-Term LNG Demand to Weaken

Reuters noted that in addition to rising output, the drop in U.S. gas prices also came on expectations demand would decline when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts for a couple weeks of maintenance in October.

U.S. gas demand has already been reduced for months by the ongoing outage at the Freeport LNG export plant in Texas which has left more gas in the United States for utilities to inject into stockpiles for next winter.

Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (Bcfd) of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.

U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.

Refinitiv Supply/Demand Stats

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.0 bcfd so far in September from a record 98.0 bcfd in August.

With the coming of cooler autumn weather, Refinitiv projected average U.S. gas demand, including exports, would slip from 93.1 bcfd this week to 92.5 bcfd for the next two weeks, similar to Thursday’s outlook.

The average amount of gas flowing to U.S. LNG export plants rose to 11.3 bcfd so far in September from 11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big plants can turn about 13.8 bcfd of gas into LNG.

Short-term Outlook

U.S. natural gas traders are playing the waiting game as we head into the shoulder season where demand could tail off quickly due to easing temperatures that aren’t too warm for intense air conditioning demand or too cool to flip on the household heater.

Lower demand combined with record production levels in September have led traders to anticipate more robust storage injections as a result. The latest U.S. Energy Information Administration (EIA) storage report supported this notion.

According to Natural Gas Intelligence (NGI), the EIA on Thursday printed an injection of 77 Bcf natural gas into storage for the week ended September 9. The build kept inventories below average levels. But analysts on the online energy platform Enelyst said it reflected mounting production levels that could help narrow deficits as the market moves into autumn.

Looking ahead, prices could see further downside pressure next week with some analysts predicting the next EIA report on September 22 to print as high as the low 100s.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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