US Natural Gas Prices Trade Just Above Multi-Month Lows Despite Bullish Storage Report

Key Takeaways

• US natural gas futures hit one-month low on Thurs. due to increased output and warmer weather forecasts. Concerns about Freeport LNG plant in Texas also weighed on prices despite record high gas flow to US LNG export plants.
• EIA reported 72 Bcf natural gas withdrawal from storage for week ending March 17 due to higher demand from cold weather.
• Higher-than-expected withdrawal led to bullish market sentiment, comparing favorably with last year’s pull of 55 Bcf and a five-year average decline of 45 Bcf.
• Early estimates for the week ending March 24 suggest a steep decrease in natural gas stocks of 38-76 Bcf, averaging 55 Bcf, despite stocks remaining above last year’s levels and the five-year average, and production staying close to record levels.

Overview

Natural gas futures are currently trading just above multi-month lows, with little change following a second consecutive lower close in the previous session. Although a bullish government inventory report on Thursday initially provided some hope, the report did not alleviate concerns about the ongoing supply/demand imbalance.

At 05:26 GMT, May natural gas futures are trading $2.288, up $0.005 or +0.22%. On Thursday, the United States Natural Gas Fund ETF (UNG) settled at $7.18, down $0.20 or -2.71%.

US Natural Gas Futures Hit One-Month Low on Decreased Demand and Production Increase

On Thursday, US natural gas futures dropped by 1% to a one-month low. This was due to an increase in gas output this month and forecasts of less cold weather and lower heating demand over the next two weeks, which caused a decrease in demand for gas.

Additionally, concerns over the Freeport LNG export plant in Texas were weighing on prices, despite the fact that the amount of gas flowing to all large US LNG export plants was expected to reach a record high this month.

A government storage report also indicated a larger than usual storage withdrawal due to increased demand for gas for heating during the recent cold weather.

Natural Gas Withdrawal Exceeds Expectations Due to Cold Weather Boosting Demand for Heating Fuel

The U.S. Energy Information Administration (EIA) reported a withdrawal of 72 Bcf natural gas from storage for the week ended March 17. This was higher than usual for this time of year due to the cold weather, which led to higher demand for heating fuel.

The East and Midwest regions led with withdrawals of 36 Bcf and 29 Bcf, respectively, according to EIA. The South Central posted a pull of 6 Bcf. Mountain region stocks declined by 3 Bcf, while Pacific inventories were flat.

The higher-than-expected withdrawal of natural gas from storage led to a bullish market sentiment as it compared favorably with a pull of 55 Bcf a year earlier and a five-year average decline of 45 Bcf.

Early Estimates Predict Steep Withdrawal for Next Week

The current week has seen the extension of winter weather, with early estimates for the week ending March 24 indicating a potentially steep decrease in natural gas stocks of 38 Bcf to 76 Bcf, averaging 55 Bcf, according to Reuters.

Despite the recent cold weather, stocks remain above the year-earlier level of 1,396 Bcf and the five-year average of 1,549 Bcf, following a mild winter from January to early March.

Production remains close to record levels of 100 Bcf/d and is expected to lead to a robust surplus relative to the five-year average, as spring weather approaches and the withdrawal season draws to a close, analysts said.