Natural Gas News: Futures Hit Monthly Low as Storage Surges

Natural Gas Market Update

U.S. natural gas futures softened on Friday, marking a monthly low in early trading. The focus among investors shifted to the latest U.S. Energy Information Administration (EIA) report, which indicated an unusually large injection into gas storage.

At 12:27 GMT, Natural Gas Futures are trading $1.925, down $0.061 or -3.07%.

Weekly EIA Gas Storage Report

According to the EIA, U.S. working gas storage stood at 2,425 billion cubic feet (Bcf) as of April 19, 2024, with a net increase of 92 Bcf over the previous week. Current stocks are 439 Bcf higher than last year and 655 Bcf above the five-year average. The total working gas has surpassed the five-year historical range, reflecting significant storage levels.

Impact of Freeport LNG Outage

The natural gas market also felt the impact of operational disruptions at Freeport LNG Development LP. The facility reported another outage at its third train—the only one not undergoing extensive maintenance—hampering production briefly. Despite these challenges, a tanker’s departure from Freeport’s Texas terminal earlier in the week suggested potential normalization of operations.

Demand and Supply Factors

LSEG forecasts show a decrease in gas demand in the Lower 48 states from 97.4 billion cubic feet per day (bcfd) this week to 91.6 bcfd next week. In contrast, gas production in April dropped to 96.8 bcfd from March’s 100.8 bcfd. Additionally, the power burn remains robust, indicating that low prices are currently driving strong demand, although the supply side struggles to keep pace.

Market Forecast

As the May natural gas contract approaches expiration, market conditions remain volatile. Despite a stabilization of prices between $1.60 and $2.00 per million British thermal units (mmbtu), several factors such as warmer weather reducing heating demand, and the extended outage at Freeport LNG influencing lower feedgas demand, continue to pressure prices. The market outlook is bearish in the short term, given the higher-than-expected storage levels and subdued demand factors.