Natural Gas Prices Forecast: Balancing Supply Surge and Rising Demand

Highlights

• Unexpected Gas Storage Withdrawal Spurs Futures Growth
• Record Gas Production Meets Anticipated Demand Increase
• U.S. LNG Exports Boost Amid Cautious Market Optimism

U.S. Natural Gas Futures See Uptick Amid Varied Factors

The U.S. natural gas futures markets are closed on Thursday, but in the previous session, the market witnessed a 1% increase in futures, influenced by an unexpected withdrawal from gas storage and the anticipation of higher heating demand due to colder weather forecasts. This rise occurred despite the consistent supply to LNG export plants.

Unexpected Storage Withdrawal Signals Demand Shift

The Energy Information Administration (EIA) reported a withdrawal of 7 billion cubic feet (bcf) from storage in the week ending November 17, a contrast to the expected addition of 7 bcf. This deviation from both last year’s and the five-year average figures indicates a shift in heating demand.

Price Trends in Gas Futures

The price of front-month gas futures for December on the New York Mercantile Exchange climbed to $2.874 per mmBtu post the EIA report, rebounding from recent lows. Despite this increase, the market’s response to high production levels and ample storage suggests tempered expectations for significant winter price surges.

High Production and Storage Impact on Supply-Demand

Record-high gas production in November and sufficient storage levels are key factors in the current market scenario. Upcoming colder weather is projected to spike gas demand, including exports. The U.S. is also poised to become a leading global LNG supplier in 2023, bolstered by strong international demand.

Additionally, Freeport LNG, a U.S. liquefied natural gas company, received Federal Energy Regulatory Commission (FERC) approval to fully reactivate its Texas export plant’s Phase II infrastructure. This includes LNG Loop 2 and Dock 2 for ship loading, after being shut down for about eight months following a fire in June 2022.

The plant’s return to full operation will increase LNG supply to global markets, particularly ahead of winter’s high demand in the Northern Hemisphere. This approval follows Freeport’s satisfactory address of the incident’s root causes and progression of cool down activities. The plant’s full capacity allows processing approximately 2.1 billion cubic feet per day of gas into LNG.

Market Outlook: Cautiously Bullish Amid Ample Supply

Given the high production and robust storage, coupled with rising demand prospects, the short-term outlook for the U.S. natural gas market leans towards a cautiously bullish sentiment. The current supply and expected demand surge, especially for U.S. LNG exports, underpin this perspective.

Technical Analysis

The current daily price of natural gas at 2.904 is positioned between its 200-day and 50-day moving averages, indicating a nuanced market sentiment. The price is just above the 200-day average of 2.613, suggesting a long-term upward trend, but below the 50-day average of 3.060, signaling recent bearish pressures.

With the price slightly above the minor support level of 2.838, this could act as a near-term floor, reinforcing stability. However, the proximity to the minor resistance at 3.002 implies that overcoming this level could signal bullish momentum.

In summary, the natural gas market is currently exhibiting a balanced sentiment, with potential for both bullish and bearish movements depending on its ability to breach these key technical levels.