Natural Gas News: Pressured by Warmer Weather, Lower Demand

U.S. Natural Gas Market

The U.S. natural gas futures are lower on Friday. This downturn follows a notably smaller storage withdrawal last week, attributed primarily to warmer-than-average weather conditions, which diminished heating demand.

At 14:07 GMT, Natural Gas Futures are trading $1.786, down $0.032 or -1.76%.

Storage and Weather Trends

According to the U.S. Energy Information Administration (EIA), there was a withdrawal of 40 billion cubic feet (bcf) of gas from storage for the week ending March 1. This figure aligns with analyst predictions but falls short compared to the 72 bcf decrease in the same week last year and the five-year average decrease of 93 bcf. Consequently, current gas stockpiles are about 31% above the usual levels for this period.

Despite predictions of slightly cooler weather in the coming weeks, meteorologists anticipate the majority of the Lower 48 U.S. states will experience warmer than normal conditions until at least March 18, which could influence heating demand.

Production and Export Constraints

Gas output in the Lower 48 states declined to an average of 100.1 billion cubic feet per day (bcfd) in early March, a notable decrease from February’s 104.1 bcfd. This trend is partly due to reduced gas prices and a drop in daily production to a preliminary seven-week low. Major producers like Chesapeake Energy and EQT have announced plans to cut gas drilling this year.

Further impacting the market is the ongoing outage at Freeport LNG’s plant in Texas, reducing the amount of gas flowing to liquefied natural gas (LNG) export plants. LNG feedgas flows have consequently diminished, with recovery not expected until Freeport LNG resumes full operation, potentially by mid-March.

Market Outlook

In the short term, with warmer weather and production curtailments, the market could face a bearish phase. The reduced demand, alongside higher stockpiles and decreased LNG exports, suggests a potential continued downturn in gas prices. However, any changes in weather patterns or a resumption in LNG exports could alter this forecast.

Technical Analysis

Natural gas futures are down for a third session on Friday after rejecting the 50-day moving average earlier in the week.

Based on the short-term range of $1.607 to $2.009, traders are testing its 50% to 61.8% retracement zone at $1.808 to $1.760 as expected. This area is critical support with longer-term implications.

Aggressive counter-trend buyers may find this zone attractive enough to enter the long side, but if it fails, prices could be headed for a retest of the lower $1.60 area.

On the upside, bearish traders are likely to continue to sell rallies until the 50-day MA at $2.073 is violated.