Natural Gas News: Freeport LNG Restart Sparks Modest Gains

Natural Gas Futures Edge Up on Freeport LNG Activity

Natural gas futures showed modest gains in early trading Tuesday, with the August Nymex contract up a little. This slight increase follows a significant 17.1-cent drop the previous day, indicating a market still grappling with bearish pressures.

At 14:13 GMT, Natural gas is trading $2.187, up $0.029 or +1.34%.

LNG Exports: A Potential Turning Point

Traders’ attention has returned to LNG demand as Freeport LNG Development LP confirmed plans for a gradual restart this week. The terminal was scheduled to receive about 370 MMcf/d of feed gas Tuesday, according to Wood Mackenzie data. While this development offers some support to prices, it’s too early to determine if it marks a definitive shift in market sentiment.

Weather Patterns Impacting Demand

Current weather patterns show strong high pressure dominating most of the US, with highs in the 90s-100s driving robust demand. However, a cooling trend is expected from Wednesday through Sunday across the Midwest, Ohio Valley, and Northeast, potentially tempering demand in these regions.

European Gas Market Uncertainty

The European natural gas market faces challenges, with imports dropping almost 12% in the first quarter of 2024 compared to the same period last year. LNG volumes alone fell 11.4%, reflecting broader market uncertainties.

Long-Term Price Outlook

Despite current market pressures, energy executives in the Rockies and Midcontinent express cautious optimism for future prices. The Federal Reserve Bank of Kansas City’s survey indicates expectations of Henry Hub prices reaching $3.00/MMBtu in six months and gradually increasing to $3.86 in five years.

Market Forecast

While recent developments in LNG exports offer some support, the natural gas market remains in a transitional phase. The slight uptick in futures prices suggests a potential bottoming out, but sustained bearish factors—including weather-related demand fluctuations and ongoing supply concerns—continue to exert downward pressure. Traders should remain cautious, watching for consistent signs of strengthening demand and stable export levels before anticipating a significant bullish turn.

Technical Analysis

Monday’s sell-off may have driven the last of the stubborn longs out of the market, perhaps allowing the bottoming process to begin. Taking out yesterday’s high at $2.285 wil be the first sign of a bottom. Nonetheless, as long as the market remains below both the 50- and 200-day moving averages, we’re going to remain in “sell-the-rally” mode.