Natural Gas Remains Close to $3 as Demand Slips
Warm weather and increased supply levels should bring LNG prices down even further in the United States.
Quick overview
- Natural gas futures in the U.S. have slipped to around $3 due to falling heating demand and warmer temperatures.
- Despite a slight uptick in prices, the overall sentiment remains negative, with expectations of low prices continuing into March.
- Natural gas output has increased slightly, reaching 108.5 bcfd for February, contributing to stable market conditions.
- Forecasts predict warmer weather will lead to decreased demand for heating and exports, potentially pushing prices downward.
The price of natural gas futures in the United States slipped this week, hovering close to $3 as demand for heating fall further and temperatures warm.
The LNG rate is expected to remain low since warm weather forecasts are dominating. Natural gas ticked up 1.64% on Thursday but is still around $3.06 per million British Thermal Units. Crude oil likewise climbed 1.41%, but these increases are not likely to be part of a larger bear trend for the market.
Negative sentiment is slipping slightly as Thursday progresses, and the price of gas futures may find a foothold a little above the $3 mark for now. No weather changes or supply level drops can explain the uptick, and we suspect it is the result of minor market correction.
Warm Weather to Persist
Investors should anticipate low prices for the coming weeks since forecasters are calling for warm weather through the beginning of March now. Output is slightly higher across the United States, with the lower 48 states reporting output of 108.5 bcfd for February. That is a slight increase from January’s 106.3 bcfd output.
Now, output is near record highs and production has returned to normal levels since the winter snow and ice have cleared across much of the United States. Export plant outflows are also higher, with major United States plants reporting 18.6 bcfd for February so far. That puts the export numbers on a path to beat out December’s numbers.
Natural gas prices are considered stable for the U.S. market for now, and there is little indication that they will continue to drop or to drop sharply. Instead, we expect prices to remain relatively close to $3, and there is a high probability that the price will stay above that level for the week.
As we move into the last week of February, though, the price of gas futures should shift and move downward in anticipation of decreasing demand, increased injections into the supply, and warmer temperatures. The weather in March should be warmer than its was in February, leading to less demand for heating and less demand for exports to other countries that will start to see warmer weather as well.
Brent oil is up 1.36% for the day, and heating oil has climbed 1.18%. We believe these are mostly market corrections and not indicators of a rising bull market trend.
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