Natural Gas News: MVP Pipeline Approval Caps Gains; EIA Sees Summer Price Rise

Natural Gas Futures Decline Amid MVP Pipeline Approval and Heat Wave

Natural gas futures experienced a downturn early Wednesday, following a significant rally on Tuesday that pushed prices above $3.00. Traders are currently assessing the implications of the Mountain Valley Pipeline (MVP) startup approval against record heat forecasts.

At 14:37 GMT, Natural Gas futures are trading $3.098, down $0.031 or -0.99%.

NatGasWeather Forecast

According to NatGasWeather, June 12-18 will see a hot ridge dominating California and the southern U.S., with temperatures reaching the 90s and 100s. The Great Lakes and Northeast will remain more temperate, with highs in the 70s to lower 80s. This weekend and next week, most of the U.S. is expected to warm above normal, with mid-80s to lower 90s in the northern regions and 90s to 100s in the southern regions. The Northwest will be cooler due to weather systems, with highs in the 60s to lower 80s. Demand is projected to be moderate through Thursday, then rising to high.

Mountain Valley Pipeline Update

The U.S. Federal Energy Regulatory Commission (FERC) granted approval for the MVP, a $7.85 billion natural gas pipeline in Virginia, to begin operations. This project, the only major gas pipeline currently under construction in the U.S. Northeast, has faced numerous regulatory and legal hurdles since its inception in 2018. FERC noted that the construction areas have been adequately stabilized. Equitrans Midstream, holding a 49% interest, plans to start commercial operations soon, although the exact start date for gas flows remains unclear.

Natural Gas Production

New data from the EIA shows a 1% decline in U.S. marketed natural gas production for 2024, driven by significant reductions in the Haynesville (9%) and Appalachia (4%) regions due to low prices. In May, overall production averaged 110 Bcf/d, a 3% decrease from Q1 2024. The Permian region’s production remained stable, correlating with steady crude oil production.

Natural Gas Prices and Storage

The Henry Hub natural gas spot price is projected to rise over the summer, averaging just over $2.60/MMBtu in Q3 2024, up from $2.12/MMBtu in May. Despite flat production and increased demand from the electric power sector, storage injections are below the five-year average, supporting higher prices. U.S. storage inventories, starting the summer with above-average levels, are expected to end the injection season 6% above the five-year average, potentially capping prices below $3.00/MMBtu.

Market Forecast

Given the combined factors of moderate supply growth, regulatory developments, and high summer demand, the outlook for natural gas remains cautiously bullish. However, prices are likely to remain subdued below the $3.00/MMBtu mark, barring any unexpected spikes in consumption or production disruptions.