Natural Gas Prices Chill Out

London: 22 March 2024 (TraderMade): Natural gas prices have been on a downward spiral over the past week, driven by a confluence of factors that point towards a well-supplied market. Let's dive into the key drivers behind this price decline:

Key Takeaways

• Larger-than-expected storage builds in the US.
• Forecasts for lower demand over the coming weeks.
• Continued outages at Freeport LNG failing to impact supply significantly.
• Technical indicators hint at a potential price decline.

Natural Gas (NATGAS) Cools Off After Brief Spike

Natural gas prices experienced some volatility over the past week, ending on a slightly positive note compared to 15 March but failing to maintain earlier gains. Here's a breakdown:

• Initial Climb: Prices kicked off the week on a positive note, closing at $1.838 on 18 March, up from $1.789 on 15 March. This upward momentum could be due to short-term factors or profit-taking after previous declines.
• Mid-Week Fluctuations: Prices continued to fluctuate throughout the week, reaching a high of $1.9115 on 20 March but also dipping as low as $1.796 on 18 March. This volatility suggests some underlying market uncertainty.
• Slight Weekly Gain: Despite the mid-week volatility, the week ended with a small gain. The closing price on 22 March was $1.8655, marginally higher than the starting price of $1.789 on 15 March.
• Looking Ahead: While the past week saw some price fluctuations, the overall movement was relatively muted. News of growing natural gas stockpiles and projections of lower demand could put downward pressure on prices in the coming days. It would be crucial to keep a close eye on these factors and any potential changes in supply or demand forecasts.

Factors Driving Natural Gas Price Volatility

Technical Indicators Flash Caution

From a technical standpoint, the natural gas market is experiencing a period of long liquidation, suggesting traders are exiting their positions. The recent price decline is accompanied by a significant drop in open interest, reinforcing the bearish sentiment.

Storage Surplus Grows

The US Energy Information Administration (EIA) 's latest report illuminated a larger-than-expected storage build, adding to the already significant surplus in the Lower 48 states. This earlier-than-usual storage injection indicates lower demand compared to previous years.

Demand Forecast Woes

Forecasts for the next two weeks predict softer demand for natural gas, further pressuring prices. The ongoing outages at Freeport LNG in Texas, which limit exports, need to be more to offset the growing stockpiles.

Summary

The abundance of natural gas in storage, coupled with a projected decrease in demand, has sent prices tumbling this week. While the Freeport LNG outages remain a factor, they need to be more to counter the overall market sentiment. With technical indicators also pointing towards a potential downside, natural gas is headed for cooler territory in the near future.