Natural gas futures rose by about 2% to a 12-week high on Monday, as oil and gas producers continued to reduce output after months of relatively low prices.
Front-month gas futures for October delivery on the New York Mercantile Exchange (NG1!) increased by 5.9 cents, or 2.4%, to $2.493 per million British thermal units (mmBtu) positioning the contract for its highest close since June 28. MCX Natural gas settled at 216.50, up 6.18%.
This price surge pushed the front-month contract into technically overbought territory for the first time since mid-June.
With gas futures up roughly 20% over the past four weeks, speculators increased their net long positions in futures and options on the New York Mercantile and Intercontinental Exchanges for the third consecutive week, reaching the highest levels since early July.
Despite the recent price gains, analysts project that gas prices at the U.S. Henry Hub benchmark in Louisiana will average around $2.41 per mmBtu in 2024, a four-year low. These low-price forecasts have been a key driver behind producers cutting output, marking the first production decline since 2020 when the COVID-19 pandemic curtailed demand.
The U.S. National Hurricane Center (NHC) forecasted an 80% chance that a disturbance in the Caribbean Sea will strengthen into a tropical cyclone as it moves toward the eastern Gulf of Mexico. Despite this, hurricanes often lower gas prices by reducing demand through power outages and disrupting LNG exports. Over 75% of U.S. gas production now comes from inland shale basins, unlike 20 years ago when 20% was offshore, making hurricanes less impactful on prices. In Canada, AECO hub gas prices fell to 5 cents per mmBtu, the lowest since August 2022, per LSEG data.
LSEG reports U.S. gas output in the Lower 48 states averaged 102.1 bcfd in September, down from 103.2 bcfd in August. With cooler weather, demand is expected to fall to 97.7 bcfd next week. LNG flows eased to 12.8 bcfd due to the planned shutdown of Cove Point LNG for maintenance.
Technical Outlook – Natural Gas Futures
Natural gas prices surged nearly 7%, marking the largest intraday gain since July 22, 2024, and settled at 216.50.
On the chart, prices are approaching a key resistance level at 218.50, forming a long bullish candlestick, which is indicating for a bullish momentum in a near future. A breakout above this level could pave the way for the next resistance range at 224.50-228.50 in the near term.
On the downside, critical support is identified at 202.50. A break below this level could trigger a pullback toward 198.50-193.50.
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Commodity Samachar Securities
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