Natural Gas Prices Forecast: Major Players Planning Significant Production Cuts

Key Points

• Natural gas futures trying to stabilize, near 3-1/2-year low.
• Major producers plan significant production and budget cuts.
• U.S. gas market reacts to legislative changes and global events.

Market Trends

U.S. natural gas futures are showing a slight increase, as market participants evaluate the impact of various factors such as weather, supply, demand, and production. Prices are currently near a 3-1/2-year low, with a focus on potential output changes for 2024.

At 13:21 GMT, U.S. Natural Gas futures are trading $1.606, up $0.025 or +1.58%.

Supply Adjustments

Key gas producers, including Antero Resources and Comstock Resources, are planning to reduce production. Antero expects a 3% drop in 2024, with a significant 26% cut in its drilling and completion budget. This reduction involves decreasing the number of operational rigs and completion crews. Comstock has also announced a reduction in gas drilling.

Supply and Demand Trends

Recent data indicates an increase in gas output in the U.S. Lower 48 states to an average of 105.8 billion cubic feet per day (bcfd) in February. Although the weather has been mostly warmer, a slight cooldown is anticipated to boost gas demand. U.S. liquefied natural gas (LNG) exports have decreased in February, with the status of the Freeport LNG facility being a contributing factor.

Legislative Developments

A recent bill proposes transferring LNG export approval authority from the Department of Energy to the Federal Energy Regulatory Commission. This change comes amidst a halt in approvals for major markets to review environmental and economic impacts. The U.S. is now the leading LNG exporter, with its strategy impacted by global events such as Russia’s invasion of Ukraine and Europe’s shift from Russian gas.

Market Forecast

The short-term outlook for U.S. natural gas futures indicates potential volatility, influenced by the balance of production cuts, fluctuating weather conditions, and legislative changes. The market is poised to respond to adjustments in supply and demand dynamics, particularly with regard to LNG exports and the interplay of global events. Analysts are closely monitoring these factors for indications of future price movements.

Technical Analysis

Natural gas futures are still fishing for a bottom on Friday, but conditions could turn more promising with several major producers planning to cut production.

Technically, we’re not watching prices to closely. We’ve focusing on price patterns and volume ships. They’ll tell us if momentum is shifting.

The ideal pattern is a lower lower than the previous session, followed by a higher close. Given the prolonged move down in terms of price and time, a confirmation of this chart pattern could trigger a notable counter-trend short-covering rally. Be patient.