Natural Gas Market Update: Key Levels and Factors Affecting Prices

The natural gas market has been experiencing fluctuations, and it’s vital for investors to stay informed about key price levels and the factors driving these changes. Currently, a move above $4.901 could indicate a resurgence in bullish momentum, targeting the next major resistance at $5.627. On the downside, essential support levels to watch include a critical pivot at $4.322, followed by supports at $4.132, $3.924, and $3.742. Additionally, the 50-day moving average, resting at $3.654, plays a pivotal role in steering the intermediate trend.

Is Weather the Biggest Risk to Bulls?

As we approach mid-March, weather patterns are becoming a central theme influencing the natural gas market. Forecasts of warmer-than-expected temperatures could dampen demand significantly. Atmospheric G2 has reported that many regions in the northern and western U.S. are predicted to experience above-normal temperatures between March 16-20. This is likely to result in a substantial decrease in heating demand.

NatGasWeather highlights that much of the central U.S. is expected to see temperatures soaring into the upper 50s to 80s this week, further suppressing short-term demand. This scenario creates a contrasting backdrop against ongoing supply concerns. BloombergNEF has projected that U.S. natural gas storage levels may be approximately 10% below the five-year average by summer. Current EIA data confirms that inventories are already 11.3% under seasonal norms, offering some level of support for prices. However, the lack of immediate cold weather could prevent traders from driving prices higher, making it essential to keep an eye on weather developments before making any trading decisions.

Is Production Weak Enough to Support Prices?

Currently, the Lower-48 states’ dry gas production is reported at 106.0 Bcf/day, reflecting a mild year-over-year increase of just 2.7%. In contrast, demand has dipped to 77.2 Bcf/day, marking a concerning 4.4% decline from the same period last year. Even homegrown LNG flows to export terminals have seen a slight drop, now resting at 14.9 Bcf/day. The sluggish demand amid modest production increases places prices in a precarious short-term situation.

Adding to the bearish sentiment, the latest EIA report revealed a smaller-than-anticipated storage draw of only 80 Bcf, which fell short of forecasts (-93 Bcf) and the five-year average draw (-94 Bcf). This inconsistency suggests that demand is not sufficiently robust to exert the necessary pressure to accelerate withdrawals and support prices moving forward.

Will LNG Expansion Drive Long-Term Support?

In a more optimistic light, a significant development on the horizon could bolster the natural gas market in the long term. The Biden administration’s recent decision to lift the pause on LNG export project approvals, initiated by President Trump, stands to enhance natural gas demand significantly. Reports indicate that the administration is nearing approval for the Commonwealth LNG export facility in Louisiana, which would add critical capacity to U.S. exports.

As more facilities come online, domestic supply tightening may result, potentially exerting upward pressure on prices in the long term. As always, staying abreast of the latest developments in both domestic policies and market fundamentals is essential for investors looking to navigate the complexities of the natural gas market effectively. Be sure to check back with Extreme Investor Network for the latest insights and market analysis that can drive your trading strategies.