Natural Gas News: Production at 101 Bcf/d – Can Demand Catch Up?

Natural Gas Futures Decline Amid Supply Glut and Mixed Demand Outlook

Natural gas futures are lower on Wednesday, continuing their downward trend for a second consecutive session. This decline follows a brief rally that saw the prompt month gain nearly 20 cents over three previous sessions.

At 11:52 GMT, natural gas futures are trading $2.128, down $0.059 or -2.70%.

Supply Remains Robust

Production estimates hold steady at around 101 Bcf/d, indicating abundant supply in the market. This high production level continues to be a key factor in pressuring prices downward, despite occasional bullish signals.

Demand Picture Mixed

Cooling demand shows variability across the United States. High pressure dominates the western and southeastern regions with temperatures in the 90s to 100s, while the central US, Great Lakes, and Ohio Valley experience milder weather. NatGasWeather forecasts national demand to be moderate for the next five days before increasing to high.

European Consumption Trends

European natural gas consumption has consistently decreased since mid-2022, influenced by mild winter weather and government policies aimed at reducing usage. In 2023, consumption in the EU-27 declined 18% from the previous five-year average. This trend has continued into 2024, with consumption remaining 19% below the 2017-21 average for the first five months of the year.

Storage Levels and LNG Imports

European storage facilities reached record-high levels at the end of the 2023-24 heating season, with inventories 83% above the previous 13-year average. The region has primarily relied on LNG imports to offset reduced pipeline receipts from Russia, with the United States remaining the largest supplier for the third consecutive year in 2023.

Market Forecast

The short-term outlook for natural gas prices remains bearish. While choppy trading patterns may persist due to fluctuating demand and occasional supply disruptions, the overwhelming supply situation continues to be the primary deterrent to higher summertime prices. Traders should closely monitor weather patterns and any potential changes in production levels for signs of price support.

Technical Analysis

U.S. Natural Gas futures are down on Wednesday, but it’s too early to tell if the market is headed for a retest of the multi-month low at $2.015 or consolidating ahead of the start of another robust short-covering rally. I say short-covering rally because I don’t believe anyone is buying the prompt month for a prolonged rally. Bullish speculators are buying the deferred futures contracts if any.

The short-term range is $2.448 to $2.015. Its 50% level at $2.232 is the resistance level that essentially stopped the rally earlier this week at $2.270.

The minor range is $2.015 to $2.270. The market is currently trading on the weakside of its pivot at $2.143.

The first task for the bulls is to reestablish support at $2.143. The second is to blast through $2.270. Until these events happen, the market is likely to remain in the strong hands of the short-sellers.