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Above-Average Temperature Forecast To Keep Natural Gas Prices Lower

By Abhishek BansalCommoditiesApr 06, 2021 05:05AM ET

www.investing.com/analysis/aboveaverage-temperature-forecast-to-keep-natural-gas-prices-lower-200571455

By Abhishek Bansal | Apr 06, 2021 05:05AM ET

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Natural gas prices are currently trading near $2.551 which is sharply lower from a recent high of $2.688 which was registered on Mar. 30. However, NG prices are still higher from a recent low of $2.422 registered on Mar. 18.

The Commodity Weather Group on Monday said that much of the US should see above-average temperatures through Apr. 9 and that warm conditions for both the East and West Coasts will last through Apr. 14. Above-average temperature is likely to reduce heating demand and will be keeping NG prices lower.

As per data from Bloomberg, US domestic demand for natural gas on Monday fell -7.6% y/y to 60.6 bcf. Also, US electricity output in the week ended Mar. 27 fell -0.9% y/y to 67,594 GWh (gigawatt hours). Natural gas is used in electricity production.

However, natural gas prices are likely to receive support from higher export numbers and low production levels. Gas flows to US LNG export terminals on Monday rose +37% y/y to 11.7 bcf. On Mar. 20, gas flows to US LNG export terminals climbed to a record 11.92 bcf (data from 2014) according to BNEF. US gas production continues to decline on Monday and fell -1.3% y/y to 91.752 bcf/d.

Meanwhile, NG inventories in US continued to grow which is negative for prices. As per a latest weekly report from EIA showed that US nat-gas inventories rose +14 bcf to 1,764 bcf. However, NG inventories are down by 11.0% y/y and are by 2.0% below their 5-year average.

As per a report from Baker Hughes, US NG drilling rigs in the week ended April 2 fell -1 rig to 91 rigs, well above the record low of 68 rigs posted in July 2020 (data since 1987).

Natural gas prices are likely to trade negatively while below the key resistance level of 50 days EMA of $2.669 while it may find a strong support base around $2.410 and $2.332

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Disclaimer: Mr. Abhishek Bansal is a new-age, first-generation entrepreneur, and the Founder Chairman of Abans Group, a quintessential diversified business group, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, and Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management.

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Above-Average Temperature Forecast To Keep Natural Gas Prices Lower

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