Natural Gas Price Fundamental Daily Forecast – EIA Sees Production Rising to Record High in 2023

U.S. natural gas futures are edging higher on Wednesday after touching a multi-month low earlier in the session on rising output and forecasts calling for lower heating demand than previously expected for this week.

The small rebound could be reflecting a technical bounce due to oversold conditions, or profit-taking and position-squaring ahead of Thursday’s government storage report.

At 12:22 GMT, March natural gas futures are trading $3.357, up $0.043 or 1.30%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $11.42, down $1.01 or -8.13%.

Rystad Energy Analyst Highlights Bearish Conditions

“U.S. natural gas demand could be on track to hit record lows in January if seasonably warm weather sticks around,” Emily McClain, vice president at consulting firm Rystad Energy, said in a note.

“Despite consistently robust LNG (liquefied natural gas) demand … particularly from European buyers, prices are falling and expected to continue bearish momentum until winter weather returns,” McClain said, noting gas production has rebounded after a winter storm caused a sudden drop in late December.

Record US Production Growth to Keep Lid on 2023-2024 Gas Prices: EIA

U.S. natural gas production will rise to a record high in 2023, while demand will fall, the U.S. Energy Information Administration (EIA) said in its Short-Term Energy Outlook (STEO) on Tuesday.

EIA projected dry gas production will rise to 100.34 billion cubic feet per day (bcfd) in 2023 and 102.29 bcfd in 2024 from a record 98.02 bcfd in 2022.

The agency also projected gas consumption would fall to 86.74 bcfd in 2023 and 85.79 bcfd in 2024 from a record 88.72 bcfd in 2022.

The EIA’s latest projections for 2023 were lower than its December forecast of 100.38 bcfd for supply but higher than its December forecast of 85.40 bcfd for demand.

Short-Term Weather Forecast

According to NatGasWeather for Jan. 11-17, “Warmer than normal conditions will rule most of the central, southern, and eastern US with highs of 30s to 50s across the Great Lakes, Ohio Valley, and Northeast and nice upper 50s to 70s over the southern US and Mid-Atlantic Coast for very light national demand.

The West will be seasonal as weather systems track inland with rain, snow, and highs of 30s to 60s. The Northern Plains will be the nation’s only cold spot with highs of 20s-30s. Overall, low to very low national demand the next 7-days.”

Short-Term Outlook

Early estimates for the U.S. Energy Information Administration (EIA) storage print covering the week ended Jan. 6 ranged from a pull of 14 Bcf to an injection of 10 Bcf, according to Natural Gas Intelligence (NGI). NGI modeled a pull of 14 Bcf.

NGI also noted that even the withdrawal end of the range would compare meekly with the year-earlier EIA print of a 179 Bcf pull. The five-year average is a 151 Bcf draw. It would also stand in stark contrast to the close of 2022.

The short-term outlook is bearish, but we still could see a short-covering rally. Nonetheless, we expect gains to be limited because we are in “Sell the Rally” mode. It’s going to have to turn extremely cold to put even the smallest dent in this bear market.