Mon, July 22, 2024

Natural Gas Production Rises as Heatwave Boosts Prices

Natural gas

Quick Look:

  • Natural Gas Futures Outlook: Closed the week with a bearish trend, influenced by high production and moderated heat forecasts.
  • Cash Market Surge: Despite bearish futures, cash prices rose as participants prepared for a late-June heatwave.
  • Supply and Storage: U.S. storage levels are robust, with production at 100 Bcf/d, indicating sufficient supply.

U.S. natural gas futures experienced a turbulent week, closing with a bearish outlook. Initially, prices climbed above $3 per million British thermal units (MMBtu) due to anticipated summer heat. However, they later declined because of increasing production and a forecast suggesting less intense heat. Despite this, cash market prices surged as market participants scrambled to secure supplies for the anticipated late-June heatwave.

Natural Gas Futures Drop to $2.881/MMBtu

Last week’s natural gas futures settled at $2.881/MMBtu, marking a decline of $0.037 or 1.27%. The futures market exhibited a bearish trend, driven by rising production levels and a tempered heat outlook indicating sufficient supply. In contrast, the cash markets showed a bullish trend, with users securing supplies in preparation for the upcoming heatwave, highlighting the contrasting dynamics between the futures and cash markets.

Storage Levels High, Production Steady at 100 Bcf/d

Current storage levels in the U.S. are comfortable, exceeding last year’s levels and the five-year average. Production in the lower 48 states remains robust at 100 billion cubic feet per day (Bcf/d), reinforcing the bearish market sentiment. This ample supply and comfortable storage levels suggest the market is well-prepared to meet demand, even as temperatures rise.

Southern Heatwave Expected to Boost NatGas Demand

A heatwave is expected in the southern United States, likely increasing demand for natural gas-fired power generation. This anticipated rise in demand may support cash prices as utilities and other users secure additional supplies to meet the increased need for cooling. The interplay between weather-driven demand and supply levels will be crucial in determining market movements in the coming weeks.

Mountain Valley Pipeline Nears Completion: Adds 2.0 Bcf/d

The Mountain Valley Pipeline is nearing completion and is expected to add 2.0 Bcf/d of additional supply. However, analysts are concerned that downstream pipeline constraints may limit the immediate impact of this new supply on the market. The integration of this new capacity will be a key factor to watch, as it could further influence supply and pricing dynamics.

EQT Resumes Production: Potential Price Impact

EQT, the nation’s largest natural gas producer, has resumed previously curtailed production. This resumption of production could further suppress prices, depending on how efficiently the additional supply is integrated into the market. The reintroduction of this supply adds another layer of complexity to the already dynamic market conditions.

Short-Term Bearish Outlook Despite Imminent Heatwave

The short-term market outlook remains bearish, driven by ample storage levels, rising production, and the imminent start of the Mountain Valley Pipeline. However, the upcoming heatwave could support cash prices, presenting a potential bullish factor. Market participants must closely monitor storage reports, pipeline developments, and weather forecasts to navigate these complex market dynamics.

Natural Gas Prices Bearish, Trading at $2.860

As of 17 June 2024, the current market trend is bearish. Prices started the day with a bearish gap and are trading below the $2.860 support line. The expected movement includes negative waves towards $2.740 and $2.550. For a bullish rally, prices would need to settle above $2.950, with bullish targets set at $3.200 and $3.500. The expected trading range is between $2.880 and $2.740, with a continued bearish sentiment prevailing in the market.

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