Record Production and Ample Storage Weigh on US Natural Gas Prices

Natural Gas prices in the US have extended the bearish move in the week ending November 17. Abundant inventory levels, diminished demand, and record production have been the primary drivers behind this fall in Natural Gas prices. The registered gas stockpiles in the US have already been 6% above normal and have been expected to reach 7% above next week.

Natural Gas prices in the US on November 17 have been hovering around USD 3.09 per MMBtu, Ex-Louisiana. Record production of Natural Gas and reduced heating demand due to milder winter weather have forced Natural Gas producers to decrease their quotation prices.

In November, average gas output rose to 106.9 billion cubic feet per day, surpassing the October volume. According to the US Energy Information Administration (EIA), dry Natural Gas production is expected to reach 103.68 billion cubic feet per day in 2023 and increase by about 1.5 percent next year.

In the last two weeks, Natural Gas prices have fluctuated a lot, driven by market forecasts. A surge in Natural Gas prices has been driven by cooler temperatures in parts of the US like Plains and Texas. However, this initial increase in Natural Gas prices has been short-lived since weather forecasts soon predicted milder conditions across most US regions, dampening the initial hike.

Talking about the global LNG market, the European LNG market has also played a crucial role in the US’s Natural Gas exports market. Despite a lower price of Asian LNG, the US stood out as the major exporter to Europe last week. However, high domestic storage in Europe has decreased the usual Natural Gas demand from this continent, which has also impacted global market dynamics.

According to the forecast, a decrease of about 2% in heating demand is expected over the next week. Nonetheless, this expectation might have been moderated by a revised weather forecast predicting cooler temperatures and inclining demand expectations. On the other end, a potential build-in storage due to high production volume might exacerbate the downward pressure on Natural Gas prices. Therefore, clearly, the next week’s outlook has been hinged on the interplay of production rates, storage levels, and weather patterns, creating an unpredictable future for US Natural Gas. The diminishing open interest should also play a role in determining the final prices of Natural Gas going forward.

Currently, Natural Gas prices have registered their support line at 3.05 and are expected to target a line of 2.75 this year.