Natural gas prices ease on lower output reductions and less warm forecasts

Natural gas experienced a 1.99% decline, closing at 221.1, driven by lower production reductions than expected and forecasts of less warm weather ahead. Despite increased flows to Freeport LNG's liquefied natural gas (LNG) export facility in Texas, prices fell. Daily output was on a track to decrease by approximately 2.0 billion cubic feet per day (bcfd) to a preliminary near three-month low of 100.1 bcfd. Meteorologists predicted near-normal weather in the lower 48 states until around September 23, followed by a warmer-than-usual period from September 24 to 30.

On a daily basis, LNG feedgas was poised to reach a near two-week high of 13.3 bcfd, thanks to increased flows to the Freeport plant. Notably, natural gas production in North Dakota reached a record 3.290 bcfd in July, surpassing the prior all-time high of 3.248 bcfd in June, while gas flaring decreased. The North Dakota Industrial Commission aims to capture at least 91% of extracted gas after November 1, 2020, to minimize flaring.

From a technical perspective, the market saw fresh selling with a 12.14% increase in open interest and a price drop of -4.5 rupees. Support for natural gas is at 218.5, with a potential test of 215.8 on the downside. Resistance is likely at 225.7, with the possibility of prices reaching 230.2 upon breaking that level.