The price of natural gas continued to be under pressure as a shift in US weather forecasts towards warming added to the selling pressure on prices. The Good Weather Group said “severe heat” is expected in the central and eastern United States from 8 in March, which reduces the need for natural gas heating and keeps supplies high.
The drop in European prices on Friday to the lowest level in the last 2-3/4 years also had a negative impact on US prices Natural gas prices have fallen sharply this year and hit a 3-1/2-year low on Tuesday as an unusually mild winter curbed heating gas prices and pushed inventories well above average.
In addition, prices are also under pressure at the Jan. 26 Freeport, Texas LNG natural gas in the export terminal. It said Thursday it was forced to shut down one of its three manufacturing facilities for a month for repairs due to equipment damaged in the extreme cold in Texas. Closing the facility will limit US natural gas exports and increase US inventories.
However, On Wednesday, prices received some support after Chesapeake Energy Corp said it would cut its production by about 20% this year due to market conditions. Last month, Chesapeake Energy merged with Southwestern Energy to become the top U.S. NG producer. Lower-48 state dry gas production Friday was 102.4 bcf/day (+2.5% y/y), according to BNEF. Lower-48 state gas demand Friday was 81.9 bcf/day (-11.9% y/y), according to BNEF. LNG net flows to U.S. LNG export terminals Friday were 13.5 bcf/day (-3.6% w/w), according to BNEF.
The U.S. Climate Prediction Center said there is a greater than 55% chance the current El Nino weather pattern will remain strong in the Northern Hemisphere through March, keeping temperatures above average and weighing on nat-gas prices. AccuWeather said El Nino will limit snowfall across Canada this season in addition to causing above-normal temperatures across North America. An increase in U.S. electricity output is positive for nat-gas demand from utility providers. The Edison Electric Institute reported Thursday that total U.S. electricity output in the week ended February 17 rose +1.8% y/y to 76,416 GWh (gigawatt hours), although cumulative U.S. electricity output in the 52-week period ending February 17 fell -0.2% y/y to 4,100,727 GWh.
Apart from that, Thursday’s weekly EIA report was added pressure on the prices as inventories for the week ended February 16 fell -60 bcf, close to expectations of -59 bcf but a much smaller draw than the five-year average for this time of year at -168 bcf. As of February 16, inventories were up +12.5% y/y and were +22.3% above their 5-year seasonal average, signaling ample supplies. In Europe, gas storage was 65% full as of February 19, above the 5-year seasonal average of 49% full for this time of year.
Technical Outlook – Natural Gas
The price of natural gas crossed the lowest level since August 2020. Prices are down more than 20% this month, compared to 71.70% since November 2023.
Prices fell sharply from a high of 320.90 (November 2023) and reached a low of 137.70 last week and settle at 143.10, compared to last week. 140.30.
Recent price action led to an inverted hammer candlestick, indicating the likelihood of a trend reversal from here. Additionally, the RSI at 14 and its 9 SMA is in the oversold zone.
Therefore, it is expected that natural gas prices may temporarily jump and recover. However, prices should rise above 158.00 to test 170-180.00.
Alternatively, key support is at 134.50, below which prices can continue to decline to 125.50 and below.
Commodity Samachar
Learn and Trade with Ease
Also Read: Gold prices may struggle in for the direction , Several members of the world’s central banks will speak today.
Recommended Read: Forex News Letter: Is Gold about to Steal the Spotlight?
Chat with our Analyst