Natural gas jump as expected, demand- supply could hold gains

Natural gas futures jumped more than 11 percent last week. Prices rose to a 12-week high as output continued to fall and forecasts showed stronger-than-expected demand next week due to an increase in gas sent to liquefied natural gas (LNG) export facilities, including Freeport LNG in Texas.

Front-month gas futures NG1! for June delivery on the New York Mercantile Exchange rose 10.3 cents, or 5.3%, to settle at $2.035 per million British thermal units (mmBtu), their highest close since Feb. 5. MCX Natural gas up 11.59% and settled at  179.10.

The price rise came even though last week’s storage build was slightly bigger market forecast.

The U.S. Energy Information Administration (EIA) said utilities added 59 billion cubic feet (bcf) of gas into storage during the week ended April 26.

That was more than the 55-bcf build analysts forecast in a Reuters poll and compares with an increase of 62 bcf in the same week last year and a five-year (2019-2023) average rise of 72 bcf for this time of year.That leaves gas stockpiles about 35% above normal levels for this time of year.

U.S. gas production has dropped by around 10% so far in 2024 after several energy firms, including EQT EQT and Chesapeake Energy CHK, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

EQT is currently the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy SWN

Further, supply demand factor also impacted the prices.  Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 95.7 billion cubic feet per day (bcfd) so far in May, down from 98.1 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.

On a daily basis, output was on track to drop by 2.1 bcfd over the past eight days to a preliminary 15-week low of 95.6 bcfd on Thursday.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through May 10 before turning to near-normal levels in the May 11-17 period.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.6 bcfd this week to 92.5 bcfd next week. The forecast for next week was higher than LSEG’s outlook on Wednesday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.2 bcfd so far in May with the slow return to service of Freeport LNG’s plant in Texas. That compares with a monthly record of 14.7 bcfd in December.

Technical View

Natural gas prices witnessed its biggest weekly gains since 8 January 2024. Prices jumped over 11% and made a high 180.10, that was highest in a five month. And it settled at 179.10 compared to previous week close of 160.50.

As per the view given last week, has proven accurate and after breaching the major hurdle 165.00 prices touched all predicted target.

Now, momentum expect to continue in a near future following the long bullish candle stick on the above chart. Further, RSI 14 and its 9 SMA is also giving an bullish signal over here.

On the upside, immediate resistance is seen at 182.80 and a break above it prices may touched next resistance 195.00-215.00

Else, any short time dip towards 168-165 will attract buying activities.