Natural Gas Surges to 15-Week High: What’s Driving the Rally?

Natural Gas Surges to 15-Week High: What’s Driving the Rally?

Natural gas futures hit a 15-week high on Wednesday after production fell following a rise in crude at liquefied natural gas (LNG) export plants. Freeport LNG has restored full service, predicting a warmer than expected next two weeks.

The warmer weather should boost the amount of gas power generators burn to produce electricity to keep air conditioners humming.

Traders said the futures price increase was kept in check by the tremendous oversupply of gas still in storage. Analysts forecast gas stockpiles were about 31% above normal levels for this time of year.

Front-month gas futures NG1!for June delivery on the New York Mercantile Exchange rose 7.2 cents, or 3.1%, to settle at $2.416 per million British thermal units (mmBtu), their highest close since Jan. 29. MCX May future settled at 198.90, up 0.61%.

That kept the front-month in technically overbought territory for a ninth day in a row for the first time since April 2022.

SUPPLY AND DEMAND Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.1 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, output dropped by around 3.0 bcfd over the past three days to a preliminary 17-week low of 95.2 bcfd on Wednesday.

That put U.S. gas production down about 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 the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy

Meteorologists projected weather across the Lower 48 states would turn from near normal now to warmer than normal levels from May 18-30.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 92.4 bcfd this week to 92.7 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Tuesday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.6 bcfd so far in May with the return to full service of Freeport LNG’s 2.1-bcfd export plant in Texas. That compares with a monthly record high of 14.7 bcfd in December.

But on a daily basis, LNG feedgas was on track to hold at 12.4 bcfd for a second day on Wednesday as flows to Freeport remain at an 11-month high of 2.1 bcfd for a third day because flows to Cheniere Energy’s

Sabine Pass in Louisiana fell to a seven-month low of 3.8 bcfd.

Technical Outlook – Natural Gas

Natural gas prices jumped to a high of 202.2, that was a highest level in 15 weeks, and settled at 198.90, up 0.61%.

On the above chart, prices reached to their January 2024 high, and formed a long bullish candle stick, which is still indicating for a bullish momentum in a near future. However, prices would need to break above 204.50 in order to extend the gain.

Alternatively, failure of the break could witness temporary pressure towards 185-180 which will attract a buying opportunity in a near future.

Hence, a fresh breakout will expect above 204.50 for target 212-218.50, else on a dip towards 185-180 with stop loss below 165.00

Happy Trading!

Commodity Samachar
Learn and Trade with Ease

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