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Will Warmer Weather Undermine Nat-Gas Bulls?
The natural gas market’s recent rally has been largely driven by a frigid Arctic blast across much of the eastern U.S. However, Maxar Technologies’ updated forecast for milder weather from February 25 to March 1 could dampen heating demand, triggering Thursday’s sell-off. The retreat from the $4.476 resistance level underscores the market’s sensitivity to weather forecasts, with traders bracing for potential downward pressure if temperatures moderate further.
How Tight Are Natural Gas Supplies?
Despite the weather-driven pullback, supply tightness continues to support natural gas prices. The latest U.S. Energy Information Administration (EIA) data showed a larger-than-expected inventory draw of 196 billion cubic feet (bcf) for the week ending February 14, outpacing forecasts of 193 bcf and the five-year average draw of 145 bcf. As of mid-February, natural gas inventories were 5.3% below their five-year average, marking the tightest supply conditions in over two years.
Could LNG Export Policy Boost Demand?
In a potentially bullish development for natural gas, President Trump’s decision to lift the Biden administration’s pause on approving liquefied natural gas (LNG) export projects could bolster demand. The market is particularly focused on the possible approval of the Commonwealth LNG export facility in Louisiana. With increased U.S. LNG export capacity, domestic natural gas could see heightened demand from global markets, adding a layer of support to prices.
What Do Production and Demand Numbers Suggest?
Production and demand metrics present a mixed picture. Lower-48 state dry gas production stood at 101.1 bcf/day, down 3.9% year-over-year, while demand surged 39.3% to 129.8 bcf/day. Additionally, LNG net flows to export terminals were up 0.4% week-over-week at 15.3 bcf/day. The Edison Electric Institute also reported a 10.9% year-over-year increase in U.S. electricity output, highlighting robust utility-driven demand for natural gas.
Market Forecast: Cautiously Bullish with Volatility Ahead
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