Natural Gas Retreats Due to Inventory Draw Below Expectations

Gentle temperatures result in decreased natural gas demand, and market outlook stays pessimistic.

Highlights

• The amount of natural gas held in storage decreased by 75 billion cubic feet compared to the previous week, falling short of analyst predictions.
• Elevated temperatures persist, leading to reduced natural gas demand.
• Natural gas prices continue to linger below the $2.00 mark.  

On February 8, 2024, the EIA issued its Weekly Natural Gas Storage Report, revealing a 75 Bcf decrease in working gas in storage from the previous week, falling slightly short of the projected -76 Bcf consensus among analysts.

During this time of the year, a typical draw averages at -193 Bcf. However, due to warmer weather conditions, the draw was smaller than expected.

Stocks currently stand at 187 Bcf higher than last year and 248 Bcf above the five-year average for this period.

Unfavorable weather forecasts persist, and traders are focused on weak demand. Whether natural gas bullish trends will emerge in the near future remains uncertain.

Following the report's release, natural gas prices declined, highlighting the weakened demand. The front-month contract price remains below $2.00.

Considering the futures curve, traders anticipate no significant improvement in the supply/demand balance in the coming months.

High output levels persist, exerting downward pressure on natural gas prices. Furthermore, the outages in LNG export plants add to the bearish sentiment in natural gas markets.

In a broader perspective, the trend remains bearish, and significant catalysts are needed to reverse the current trajectory of natural gas.