Natural Gas Gains On Forecasts For Much Colder Weather And Higher Heating Demand

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Natural Gas Gains On Forecasts For Much Colder Weather And Higher Heating Demand
Credit: © Reuters.

Natural gas prices experienced a 2.36% increase, settling at 212.3, primarily driven by forecasts of colder weather and heightened heating demand in January. The surge was further fueled by record amounts of gas flowing to U.S. liquefied natural gas (LNG) export plants. Despite U.S. utilities pulling 87 billion cubic feet of natural gas from storage during the week ending December 22, exceeding market expectations, the drawdown was less than the 195 bcf recorded in the same week the previous year. Meteorologists anticipated warmer-than-normal weather until December 30, followed by a shift to colder-than-normal conditions from December 31 to January 6.

This projection, coupled with financial firm LSEG forecasting a dip in U.S. gas demand to 120.5 bcfd this week due to the Christmas shutdown, contributed to the short-term decrease. However, a subsequent rise in demand to 130.7 bcfd was projected for the next week as January was expected to bring colder temperatures. LSEG reported an increase in average gas output in the Lower 48 U.S. states from 108.3 bcfd in November to 108.7 bcfd in December. Gas flows to major U.S. LNG export plants also rose to 14.6 bcfd in December, up from the previous record of 14.3 bcfd in November.

From a technical standpoint, the market witnessed short covering, as open interest dropped by -5.12% to 26385 while prices rose by 4.9 rupees. Support for Natural Gas is identified at 205.1, with a potential test of 198 levels if this level is breached. On the upside, resistance is expected at 216.5, and a move beyond could lead to prices testing 220.8.

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