Natural gas prices remain highly volatile as the market continues to contemplate balances in the wake of a larger-than-expected inventory withdrawal. According to the US Energy Information Administration (EIA), total working gas in storage as of Feb. 3 stood at 2,366 Bcf, which is 233 Bcf higher than a year earlier and 117 Bcf above the five-year average.
The February Short-Term Energy Outlook report projected that the dry gas production will increase to 100.27 bcfd in 2021 and further to 101.68 bcfd in 2024, following a record high of 98.09 bcfd in 2022. The Energy Information Administration anticipates that upon completion of the withdrawal season at the end of March, U.S. natural gas inventories will total greater than 1.8 trillion cubic feet, which is a 16 percent increase compared to the five-year average.
It is estimated that U.S. electricity production will decrease by 2% in 2023, mainly due to a decrease in usage in the residential and industrial areas. DeCarolis mentioned that, in comparison to 2022, energy-related carbon dioxide emissions are estimated to drop by 4% in 2023, primarily due to a 15% decline in coal emissions this year.
According to a report, the Henry Hub natural gas spot price is projected to average 3.40 U.S. dollars per million British thermal units (MMBtu) in 2023, a decrease of nearly 50 percent from the previous year. Throughout the period, Nymex natural gas futures moved up slightly as traders attempted to set a base for a market that was facing mostly bearish fundamental factors in the immediate future.
The beginning of the 2022/23 winter season has been much warmer than usual, causing a decrease in heating demand in the U.S., which means that more gas is in storage than anticipated. TradingResearch reports that the expected rise in temperatures must be rapid given the expected rise in temperatures.
Technically speaking, a reversal from the lows tested on Feb.3, keeping the natural gas futures 5% above the lows tested on Feb. 3, looks evident enough to hit $3.6 soon. According to NatGasWeather.com, weather systems featuring temperatures that range from mild to cool will affect the West and Northern Plains, with highs ranging from 30s to 60s. This could lead to a range-bound trade in natural gas futures between $2.777 and $3.858.
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1. “Natural Gas Futures Slightly Higher as Forecasts Hint at ‘Frosty' Late February Temps” Natural Gas Intelligence, 10 Feb. 2023, https://www.naturalgasintel.com/natural-gas-futures-slightly-higher-as-forecasts-hint-at-frosty-late-february-temps/
2. “Natural Gas Technical Analysis: The Price is Preparing to Break its Current Support” DailyForex.com, 6 Feb. 2023, https://www.dailyforex.com/forex-technical-analysis/2023/02/natural-gas-technical-analysis-6-february-2023/191029
3. “U.S. natural gas production in 2023 forecast to hit record high” Xinhua, 7 Feb. 2023, https://english.news.cn/20230208/2666edcc0b1f441ab766cbaee91315a8/c.html
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5. “EIA slashes price forecast for natural gas amid warmer weather” talkbusiness.net, 7 Feb. 2023, https://talkbusiness.net/2023/02/eia-slashes-price-forecast-for-natural-gas-amid-warmer-weather/
6. “Natural Gas Weekly Cash Prices Plummet in Wake of Winter Storm, but Futures Look for Bottom” Natural Gas Intelligence, 10 Feb. 2023, https://www.naturalgasintel.com/natural-gas-weekly-cash-prices-plummet-in-wake-of-winter-storm-but-futures-look-for-bottom/
7. “Natural gas has first positive week in eight as selling pauses By Investing.com” Investing.com, 10 Feb. 2023, https://www.investing.com/news/commodities-news/natural-gas-has-first-positive-week-in-eight-as-selling-pauses-3001024
8. “Natural Gas Prices Tumble, Volatility Spikes Post EIA Outlook” Investing.com, 8 Feb. 2023, https://www.investing.com/analysis/natural-gas-prices-tumble-volatility-spikes-post-eia-outlook-200635115