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Natural Gas: Improved Weather To Keep Prices Lower

Published 03/22/2021, 05:40 AM
Updated 07/09/2023, 06:32 AM

Natural Gas prices are currently trading near $2.502, which is marginally lower from Friday's closing. Improved weather forecast is likely to keep NG prices under prices as it will reduce heating demand. Weather agency Maxar predicted above-normal temperatures in the Eastern US from Mar. 24-28 and that the Northwest, Rockies, and South will see near-normal temperatures from Mar. 29-Apr. 2.

However, some improvement in domestic and export demand is providing support to the prices.  As per Bloomberg data, natural gas local demand in the US on Friday rose +5.7% y/y to 79 bcf. Also, gas flows to U.S LNG export terminals on Friday matched Thursday's record of 11.8 bcf, up +46% y/y (data from 2014).

Additionally increasing US electricity output and domestic gas production is also supportive for prices. US electricity output in the week ended Mar. 13 rose +0.3% y/y to 69,318 GWh (gigawatt hours), US gas production on Friday fell -2.8% y/y to 91.585 bcf/d.

Meanwhile, the latest Inventory report from EIA suggests that current gas inventories are down -12.4% y/y, the largest shortfall in 1-3/4 years, and are -5.0% below the 5-year average.

As per the report from Baker Hughes, the number of active US Natural gas drilling rigs in the week ended Mar. 19 was unchanged for a third week at 92 rigs.

According to the CFTC Commitments of Traders report for the week ended Mar. 16, net longs for natural gas futures sank 37,980 contracts to -38,022 for the week. Speculative long position plunged 9,858 contracts, while shorts were added by 28,122 contracts.

Natural gas prices are likely to trade with negative bias while below the key resistance level of 50 days EMA at $2.716 while it may find strong support around $2.498.

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