HomeMost PopularDemand Soars as Cooler US Temps Drive Nat-Gas Prices Up

Demand Soars as Cooler US Temps Drive Nat-Gas Prices Up

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Weather Forecasts Boost Prices

Nat-gas prices saw a solid uptick on Monday with April Nymex natural gas (NGJ24) closing up by +0.048 (+2.90%). Analysts attributed the rally to forecasts indicating cooler temperatures in the US, particularly for the East Coast and the Midwest between March 23-27. This shift in weather patterns is expected to elevate heating demand for natural gas, driving prices higher.

Challenges in the Market

The year started on a grim note for nat-gas, witnessing a significant drop in prices. Late February saw prices hitting a 3-1/2 year nearest-futures low (H24) due to an exceptionally mild winter that reduced heating consumption and led to soaring inventories. Moreover, the current El Nino weather pattern, forecasted to persist through March, is anticipated to keep temperatures above average, further impacting nat-gas prices.

The Freeport LNG nat-gas export terminal in Texas faced operational hurdles after one of its production units was damaged in extreme cold weather in March. Although the unit has resumed operations, maintenance shutdowns for the other units are scheduled until May. This decrease in capacity restricts US nat-gas exports, contributing to the accumulation of nat-gas inventories in the country.

Market Dynamics

Lower-48 state dry gas production stood at 100.3 bcf/day (+0.6% y/y), while gas demand was at 85.5 bcf/day (-8.1% y/y) on Monday. LNG net flows to US LNG export terminals reached 13.4 bcf/day (-1.2% w/w), indicating a nuanced market landscape.

Conversely, a decline in US electricity output negatively affects nat-gas demand from utility providers. Recent reports showed a -2.8% y/y drop in total US electricity output. Despite this, the weekly EIA report signaled bullish sentiment for nat-gas prices, as inventories for the week ended March 8 fell by -9 bcf, surpassing expectations.

Market Performance and Forecast

The number of active US nat-gas drilling rigs rose by +1 rig to 116 rigs in the week ending March 15. While this is slightly above the 2-year low recorded in September 2022, it marks a significant deviation from the 4-1/2 year high of 166 rigs in September 2020 amid the pandemic.

Amidst these market shifts and challenges, the demand for natural gas continues to rise as cooler temperatures grip the US, signaling a potential upward trajectory for nat-gas prices.

For more energy news, follow updates from Barchart.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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