Natural Gas Prices Forecast: Futures Dip Amid Demand, Biden’s LNG Policy Shift

Key Points

• Natural gas futures fall due to demand, policy changes.
• Weather fluctuations lead to variable natural gas demand.
• LNG exports recovering slowly from extreme weather disruptions.

Mixed Sentiment to Start the Week

U.S. natural gas futures are edging lower on Monday as traders assess impacts from fluctuating demand, seasonal weather patterns, and recent policy changes on LNG exports. Last week’s surge, driven by cooler weather forecasts and recovery post-Arctic freeze, highlights the market’s sensitivity to environmental factors and supply dynamics.

At 13:39 GMT, Natural Gas Futures are trading $2.129, down $0.046 or -2.11%.

Demand Variability with Weather Changes

LSEG forecasts indicate a notable decrease in natural gas demand in the coming week, followed by a slight rebound as cooler weather returns. This oscillation in demand aligns with the meteorological projections of warmer conditions until early February, succeeded by a cooler spell.

Supply and Storage Insights

Natural gas production in the Lower 48 states observed a dip in January, contrasting with December’s highs. Despite a substantial drawdown in storage, levels remain comfortably above last year’s figures and the five-year average, suggesting a robust supply buffer.

LNG Exports and Weather Impacts

LNG exports are gradually recovering from the disruptions caused by extreme cold weather. A modest increase in daily LNG feedgas is expected, recovering from significant drops during the recent freeze.

Drilling Trends and Production Outlook

The latest Baker Hughes data reveals a modest increase in U.S. drilling activity. However, the current rig count is significantly lower than last year, indicating a cautious approach in ramping up production.

Market Forecast: Short-Term Outlook

Given the current supply and demand scenario, coupled with weather-induced demand fluctuations and cautious production increases, the short-term market outlook for U.S. natural gas futures leans towards a bearish sentiment. However, the market remains reactive to any sudden changes in weather patterns and LNG export dynamics.

Technical Analysis

U.S. natural gas futures are trading lower on Monday, closely interacting with the 50-day moving average at $2.124. This movement indicates that although the long-term trend is down, as shown by the market’s position compared to the 200-day moving average at $2.521, the 50-day moving average, or intermediate trend indicator is likely to be a significant factor in shaping trading activity today and possibly throughout the week.