Natural gas futures jumped about five percent on Wednesday on forecasts for cooler weather and higher heating demand over the next two weeks than previously expected and as output remains slow to return after wells and other equipment froze in last week’s Arctic freeze.
This price increase came despite weather forecasts for warmer than normal weather until at least early February, which should reduce gas demand and increase production over time.
Last week’s extreme cold pushed gas demand to a record daily high and dropped both gas production and liquefied natural gas (LNG) to their lowest levels of the year. Financial firm
LSEG reported that average gas production in the lower 48 states fell to 102.9 bcfd in January, down from December’s record of 108.0 bcfd.
US daily gas production growth was 13.2 billion days from January. 17-24 to Wednesday’s tentative weekly peak of 103.7 bcfd. However, this is not enough to offset the $17.2 billion drop in production from 8-16. to a 12-month low of $90.5 billion on Jan. 16, mainly due to freezes and other cold weather events.
Meteorologists have predicted that temperatures in the lower 48 states will remain warmer than normal from now until at least February. 8.
As colder temperatures arrive, LSEG forecast US gas demand in the lower 48 states, including exports, will drop from $144.7 billion this week to $124.7 billion next week. Those forecasts were higher than LSEG’s Tuesday outlook. That compares with record daily demand of 168.4 bcfd on Jan. 16 during the Arctic freeze.
US pipeline exports to Mexico averaged 5.8 BCFD in January, compared to 4.7 BCFD in December, but well below the monthly record of 7.0 BCFD in August.
Tomorrow, Natural Gas Storage due to release by Energy Information Administration which will have a strong impact on the prices.
Technical Outlook – Natural Gas
The price of natural gas recovered sharply from the end of the month. Prices rose from yesterday’s low of 175.00. Today it settled at 186.80, an increase of 4.94%.
The appearance of a long rising candlestick indicates strong buying activity in the near term. In addition, the above chart saw a positive divergence in between the RSI and prices, which also offers a bullish price outlook.
Therefore, a break above 190 in February 2024 Future will extend recent gains and prices may soon test the next resistance at 198.00-208.00.
On the downside, crucial support is at 175.00 and only a break below could prove another rally to 168.00-163.00
Commodity Samachar
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