U.S. Natgas Rally Cools as Investors Await Storage Report

U.S. natural gas futures fell more than 3% on Thursday as investors awaited a weekly storage report and booked profits following a rally in the previous session spurred by Chesapeake Energy’s decision to cut its planned output for 2024.

Front-month gas futures fell 5.4 cents, or 3.1% at $1.719 per million British thermal units at 9:52 am ET.

On Wednesday, prices posted their biggest one-day percentage gain since July 2022 after Chesapeake Energy – soon to be the biggest U.S. gas producer after its merger with Southwestern Energy – cut the amount it plans to produce in 2024 by roughly 30% in response to a plunge in gas prices to a 3-1/2-year low.

“Despite the rally following the Chesapeake announcement, the reality hasn’t changed, which is that the market is in a oversupply. We are getting some profit takes today ahead of the storage report,” said Robert DiDona of Energy Ventures Analysis.

“It is hard to argue for any type of market tightness here in the short term. If more producers don’t quite grow production or spend CapEx or not make investments and we get some summer demand then prices could move above $2 mark, but market could see lower curves if we get a mild summer and see no more production cuts.”

The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. ET (1530 GMT). U.S. utilities likely pulled a much smaller-than-usual 65 billion cubic feet (bcf) of natural gas out of storage last week as warmer-than-normal weather limited heating demand, a Reuters poll showed.

Gas prices have fallen over 30% so far this year because a mild winter kept heating demand low, allowing stockpiles to remain at well above normal levels, while output remained near record levels despite an Arctic freeze in January that briefly cut output and caused gas demand to soar to a record high.

Last week, U.S. energy firms Antero Resources and Comstock Resources said they planned to reduce drilling this year, while EQT, currently the nation’s biggest gas producer, reduced its 2024 production guidance range.

For nearly a year, U.S. natural gas producers have cut production as prices fall, but relentless output gains, including from oil companies that pump gas as an oil byproduct, have unleashed record supplies.

U.S. liquefied natural gas (LNG) company Cheniere Energy posted a 38.5% fall in its full-year LNG revenue on Thursday, hit by the fall in natgas prices.

U.S. Energy Secretary Jennifer Granholm said on Wednesday the government’s pause on approvals of exports of LNG will not affect relationships with allies that import the fuel. Last month, President Joe Biden paused pending approvals of exports from new LNG projects, a move cheered by climate activists that could delay decisions on new plants.

“The U.S. LNG sector is projected to see substantial demand growth, from 13 Bcf/d in 2023 to nearly 25 Bcf/d by 2028, driven by projects already authorized. Key facilities like the Golden Pass and Plaquemines LNG are on track to start commissioning in 2024, promising increased demand,” said Gelber & Associates in a note dated Wednesday.

“That said, the pause has led to delays in FIDs (Final Investment Decisions) for new projects in both the U.S. and Mexico and raised uncertainties about the U.S.’s role as an LNG exporter in the longer term,” the note added.

Meanwhile, three of Venture Global LNG’s major customers have asked energy regulators to address the LNG developer’s request for an one-year permit extension to complete a Louisiana export facility, signaling their intention to voice concerns.

(Reporting by Ashitha Shivaprasad and Anjana Anil in Bengaluru; editing by Barbara Lewis)