U.S. natural gas prices experienced a decline in early trading Thursday, as a significant increase in inventories overshadowed moderately positive weather-related demand forecasts. Commodity analysts Ewa Manthey and Warren Patterson at ING observed that the supply surplus is accumulating at a quicker pace than previously projected, placing downward pressure on prices.
Second Consecutive Triple-Digit Build Raises Supply Concerns
“U.S. natural gas prices commenced trading on a weaker note today, primarily due to escalating storage levels which counteracted the anticipated benefits of favorable weather patterns expected in the near term. The Energy Information Administration (EIA) reported last week that weekly natural gas inventories exceeded average market expectations, bringing total stockpiles to 2.15 trillion cubic feet (Tcf). This figure represents a 1.4% increase above the five-year average,” analysts noted. This surplus is creating concerns about potential oversupply in the market, particularly as production remains robust.
“This marks the second consecutive week of triple-digit inventory builds, a trend that has rapidly shifted the storage situation from a 230 billion cubic feet (Bcf) deficit in the first week of March to the current surplus. This rapid turnaround underscores the strength of domestic natural gas production and relatively muted demand during the shoulder season. However, weather forecasts have shown a slight improvement, with expectations of warmer temperatures across both northern and southern regions of the country, which could potentially stimulate demand for natural gas-fired power generation and provide some support to prices.” Market participants are closely monitoring these weather patterns to gauge their impact on near-term demand and inventory levels. Furthermore, export demand, particularly for liquefied natural gas (LNG), remains a crucial factor influencing the overall balance of the natural gas market. Any disruptions to LNG exports could exacerbate the existing supply surplus and further depress prices.
