NatGas Supported by Low Weekly Injection Expectations

Natural gas futures are trading higher late in the session on Tuesday after jumping nearly 3% shortly after the opening before giving back most of those early gains.

The catalysts behind the early session strength were expectations that recent declines in output will reduce the amount of gas utilities can inject into storage in coming weeks to levels below normal for this time of year.

At 19:09 GMT, June natural gas futures are trading $6.876, up $0.071 or +1.04%. The United States Natural Gas Fund ETF (UNG) is trading $23.73, down $0.49 or -2.02%.

Gas Output, Demand Expected to Slide

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 94.3 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December 2021.

On a daily basis, however, output was on track to drop about 3.9 bcfd over the past three days to a preliminary 91.6 bcfd on Tuesday, the lowest since early February.

Additionally, with the weather turning seasonally milder, Refinitiv projected average U.S. gas demand, including exports would slide from 92.2 bcfd this week to 90.6 bcfd next week. Those forecasts were similar to Refinitiv’s outlook on Monday.

NatGasWeather Outlook

According to NatGasWeather for April 26 to May, “Comfortable temperatures continue across the East with highs of 60s to 80s. However, a chilly late season weather system over the Midwest will bring showers and thunderstorms from the Great Lakes to the Southeast, along with cool overnight lows of 20s to 40s, then spreading through the East Coast Wednesday-Thursday for stronger demand.

The Northwest will be showery and mild with highs of 40s to 60s, although hot across the Southwest with 90s. Reinforcing cool shots will sweep across the Midwest and East Friday-Monday to keep stronger versus normal demand in place, aided by very warm to hot temperatures over the southern US, including 90s into West Texas.

Short-Term Forecast

Lower production has replaced weather-related issues as the key price driver at this time.

Bespoke Weather Services doesn’t expect production to remain at current levels for long, but “With the production drop, as well as much lower” wind generation in the power sector,” balances appear to be tightening back up, especially relative to last week.

This week’s U.S. Energy Information Administration (EIA) weekly storage report is expected to come in on the light side again so the projected deficit will remain intact, supporting prices at current levels.