US Natural Gas Analysis – January-25-2024

The US natural gas market has witnessed a notable increase in futures, reaching beyond $2.6/MMBtu. This surge comes after a recent dip to a one-month low at $2.31/MMBtu. The slow rebound in production following a severe Arctic chill has been a critical factor in this upward trend. January’s average natural gas production declined to 102.8 billion cubic feet daily (bcfd). This figure marks a decrease from December’s peak production of 108.0 bcfd. The sluggish recovery underscores the challenges in swiftly restoring output levels after extreme weather events.

NATGAS Analysis 4-Hour Chart

Expanding Exports and Domestic Dynamics

There’s a growing trend in the volume of natural gas-directed towards US liquefied natural gas (LNG) export facilities. Concurrently, pipeline exports to Mexico have increased, averaging 5.7 bcfd in January. This is a noticeable increase from the 4.7 bcfd recorded in December, although it hasn’t yet reached the record high of 7.0 bcfd seen in August. The upcoming start of operations at New Fortress Energy’s LNG export plant in Altamira is expected to boost exports to Mexico further. This expansion in export activity is reshaping the US natural gas market, reflecting a broader shift in global energy dynamics.

Near-Term Outlook: Mild Weather and Demand Patterns

Despite these developments in production and export, the demand for heating is projected to be lower than usual. Meteorological forecasts are predicting above-average temperatures extending at least until February 7. This mild weather pattern suggests a reduced need for heating, which traditionally drives up natural gas consumption in winter. The intersecting factors of production recovery, export dynamics, and fluctuating demand paint a complex picture for the natural gas market in the short term. As the industry navigates these variables, market watchers remain attentive to the potential impacts on prices and supply stability.