Natural Gas: Is The Price About To Fall?

US natural gas futures slipped almost 2% to a fresh five-week low on Monday on forecasts for mild weather through late March.

The fall came despite forecasts for higher-than-expected demand over the next two weeks as low gas prices prompt power generators to burn more gas and less coal to produce electricity.

Front-month gas futures fell 5.1 cents, or 1.9%, to $2.650 per million British thermal units at 8:13 a.m. EST (1313 GMT), putting the contract on track for its lowest close since Jan. 29 for a third day in a row.

Forecasts for milder weather and lower heating demand in March prompted speculators to cut their net long positions on the New York Mercantile (NYMEX) and Intercontinental Exchanges for a second week in a row last week for the first time since December.

Data provider Refinitiv said output in the Lower 48 US states had averaged 91.0 billion cubic feet per day (bcfd) so far in March. That compares with a 28-month low of 86.5 bcfd in February when extreme weather froze gas wells and pipes in Texas and an all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would rise to 105.7 bcfd next week from 105.4 bcfd this week as power generators burn more gas instead of coal.

The amount of gas flowing to US LNG export plants, meanwhile, has averaged 10.3 bcfd in March. That compares with a four-month low of 8.5 bcfd in February as extreme cold cut power and gas supplies to the facilities, and a monthly record high of 10.7 bcfd hit in December.

Buyers around the world continue to purchase near record amounts of U.S. gas because prices in Europe and Asia remain high enough to cover the cost of exporting the US fuel.

Traders, however, noted US LNG exports cannot rise much more until new units enter service in 2022 since the United States has the capacity to export only about 10.5 bcfd of gas as LNG. LNG plants can pull in a little more gas than they can export since they use some of the fuel to run the facility.

Source: Reuters