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Natural Gas: Is a New Price Low in the Cards?

Published 02/13/2024, 02:55 AM
Updated 05/27/2024, 01:10 PM
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I am excited to share with you my weekly article.

In the first part of this article, we will highlight the most promising futures and stocks at the moment.

Despite recent tensions in the bond market, Wall Street once again set a new record high this week. However, Europe remains in a state of uncertainty. While the luxury goods and automobile sectors continue to experience strong growth, financial stocks are suffering significant losses. In the absence of a significant macroeconomic catalyst, volatility appears to have abated. Inflation data expected in the United States this week will be critical to further understanding the current economic landscape.

The oil market, Future Crude Oil WTI - Mar 2024, continues to fluctuate, with prices continually rising and falling. This week has seen an increase and the forecast from last week's article seems to be close to reality with prices around $80. The situation remains uncertain in the Middle East, with Israel rejecting a cease-fire offer in Gaza and the United States eliminating pro-Tehran groups in Iraq. At the same time, the U.S. Energy Agency revised downward its production outlook for 2024, forecasting a peak of less than 13.3 million barrels per day.

The natural gas future, Future Natural Gas - Mar 2024 still looks uncertain, especially for the next few years. As expected, U.S. natural gas futures prices fell to $1.83/MMBtu-the lowest level reached since September 2020. At the same time, gas production is returning to pre-cold weather levels thanks to the restoration of gas wells that were shut down during the severe cold weather in mid-January. However, technical problems with the Freeport LNG export facility have restricted the flow of gas to LNG export facilities in the United States, and record levels are not expected to return until the facility is fully operational.

According to government data, U.S. utilities withdrew only 75 billion cubic feet (bcf) of gas from storage last week. This is significantly less than the 217 bcf withdrawn during the same week last year. In addition, the report indicates that the level of gas in storage is still 10.6 percent higher than the seasonal norm. Weather forecasts indicate that temperatures will remain above average until late February.

A paradoxical analysis emerges from the rig count. In its weekly survey, Baker Hughes reported a 4-unit increase in the total number of active rigs in the United States, which now stands at 623. There was stability in the number of crude oil rigs (499) while gas rigs increased by 4 to 121.

At a time when gas production is very high, rigs continue to increase, causing an oversupply. This excess can have serious consequences on the market, making it more difficult for producers to sell their gas at the desired price.

There is no good news coming from the weather, as forecasts indicate that the period between February 17 and 24 will be less cold than expected.

There is likely to be a technical rebound in the short term for natural gas prices, but in the medium term I remain pessimistic and believe they may fall as low as 1.50. We may see a price recovery only from April onward.

I look forward to sharing the second part of this article next week, where I will look at index futures.

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