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U.S. natural gas futures settled just above the $2 level to a fresh nine-month low on Tuesday, as warm weather forecasts point to lower near-term demand than previously expected, prompting concerns about inventory surpluses.
According to Reuters, traders said production was rising as gas wells continue to return to service after last month’s extreme cold, while LNG feedgas remained low due mostly to an ongoing unit outage at Freeport LNG’s export plant in Texas.
“March ’24 prices tested $2 several times in recent sessions but are so far holding above it today, albeit barely,” NatGasWeather.com said. “Clearly, a cold U.S. pattern will be required for much of the second half of February if a sustained weather rally is to be expected.”
Front-month Nymex natural gas futures (NG1:COM) for March delivery settled -3.5% at $2.009/MMBtu, the lowest close since last April 13.
ETFs: (NYSEARCA:UNG), (BOIL), (KOLD), (UNL), (FCG)
Rising price volatility in recent weeks has increased interest in gas trading with open interest in Nymex futures rising to nearly 1.5M contracts on February 2, the most since February 2020, for a fourth day in a row.
U.S. natural gas production and demand will rise to record highs in 2024, the U.S. Energy Information Administration said in its Short Term Energy Outlook.
Domestic dry gas production will rise to 104.37B cf/day this year and 106.46B cf/day in 2025 from a record 103.75B cf/day in 2023, while gas consumption is projected to rise from a record 88.96B cf/day in 2023 to 90.64B cf/day in 2024 before easing to 89.55B cf/day next year, the EIA said.
The EIA said it expects storage to end the November-March winter heating season at 1,910 Bcf, or 15% above the five-year average.
