Natural Gas News: Will Milder Weather Further Impact Futures Next Week?

US Natural Gas Market: Weekly Recap and Forecast

Last week, U.S. natural gas futures saw a notable decrease, dropping over 8% for a second consecutive weekly loss. The downturn was primarily driven by forecasts for milder weather, which is expected to reduce heating demand.

For the week-ending March 15, natural gas settled at $1.655, down $0.15 or -8.31%

Weather Patterns and Demand

Meteorological forecasts predict warmer-than-normal conditions across the Lower 48 states until March 18, followed by a shift to near or colder-than-normal temperatures from March 19-26. However, a recent warmer trend in forecasts for late March suggests reduced demand, casting a bearish outlook for the period.

Rig Counts and Future Output

According to Baker Hughes, the U.S. witnessed a significant increase in oil and natural gas rigs, the largest weekly addition since September. The oil and gas rig count, an indicator of future output, rose to 629 by March 15, marking the highest count in six months. This increase hints at a potential rise in future natural gas production.

Storage and Withdrawals

The U.S. Energy Information Administration noted a larger-than-expected withdrawal of 9 billion cubic feet (bcf) from storage for the week ending March 8. Although this surpassed analysts’ forecasts, the market’s subdued response indicates that additional factors are influencing pricing.

Factors Influencing Prices

In late February, gas prices hit a low at $1.511 per mmBtu, the lowest since June 2020. This was attributed to near-record output, mild weather, and reduced heating demand, leading to increased gas storage. However, reduced output from major producers like EQT and Chesapeake Energy could influence future supply levels.

Production and Demand Projections

The U.S. EIA anticipates a decline in natgas production this year, while demand is expected to reach record highs. Conversely, financial firm LSEG forecasts a slight decrease in gas demand in the Lower 48 states in the upcoming week. Current production averages are lower compared to the monthly record set in December 2023.

LNG Exports and Future Outlook

Venture Global LNG’s recent regulatory submission for its Louisiana export facility suggests upcoming developments in the LNG export sector. Looking ahead, there is a bullish sentiment for the second half of 2024, driven by expected supply-side corrections and new demand from LNG facilities like Venture Global’s Plaquemines.

Short-Term Market Forecast

Considering the current weather forecasts, increased rig counts, and the recent mild reaction to storage withdrawals, a bearish outlook prevails for the short-term natural gas market. However, with anticipated adjustments in production and the initiation of new LNG projects, the latter part of 2024 holds a bullish potential.