Natural Gas Prices Fall as Output Rises and Demand Drops on Warmer Weather Forecast

Key Takeaways

• Natural gas falls on less cold weather, higher output
• Record LNG exports despite falling gas prices
• US gas output rises in March despite earlier decline

Overview

Natural gas futures fell to a three-week low on Monday, due to forecasts of less cold weather and lower demand this week, coupled with an increase in gas output so far this month.

At 05:46 GMT, May natural gas futures are trading $2.354, up 0.023 or +0.99%. On Monday, the United States Natural Gas Fund ETF (UNG) settled at $7.45, down $0.35 or -4.49%.

US Natural Gas Futures Fall Despite Record LNG Exports

US LNG exports are expected to hit a record high in March despite a fall in gas prices.

Freeport LNG’s export plant in Texas returned to production in February after an eight-month outage and has been contributing to record gas flows to all seven of the major US LNG export plants.

The plants have a capacity to turn approximately 13.8 billion cubic feet per day of gas into LNG, and total gas flows in March are expected to exceed the previous monthly record of 12.9 billion cubic feet per day recorded in March 2022.

US Gas Output Rises in March Despite Earlier Decline

US gas output rose in March to 98.7 bcfd from 98.2 bcfd in February due to lower prices and improved weather. However, gas production had earlier declined in January and December 2022, leading some energy firms to reduce their rig usage.

The extreme cold in February and late December also froze some oil and gas wells, cutting output in several producing basins. Meteorologists predict mostly near-normal weather conditions in the Lower 48 states through April 3.

Daily May Natural Gas Technical Analysis

The main trend is down according to the daily swing chart. A trade through $2.324 will signal a resumption of the downtrend, while a move through $2.263 will reaffirm the downtrend. The main trend will change to up if buyers can take out $2.789.

The nearest resistance is a minor pivot at $2.557, followed by a short-term Fibonacci level at $2.604. The closest support is the main bottom at $2.263.

Daily May Natural Gas Technical Forecast

Trader reaction to $2.331 is likely to determine the direction of the May natural gas futures contract on Tuesday.

Bullish Scenario

A sustained move over $2.331 will indicate the presence of buyers. If this creates enough upside momentum then look for a possible surge into a minor pivot at $2.557.

Bearish Scenario

A sustained move under $2.331 will signal the presence of sellers. This could lead to a quick test of the main bottom at $2.263, which is also the trigger point for an acceleration to the downside.