Natgas Prices Face 4th Straight Monthly Decline on Storage Surplus

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U.S. natural gas futures edged lower on Thursday ahead of a storage report that is likely to show a smaller-than-normal withdrawal, further adding to the excess supplies that drove prices on a path for their fourth consecutive monthly decline.

Front-month gas futures for April delivery lost 1% to $1.869 per million British thermal units (mmBtu) at 10:06 a.m. ET (1506 GMT). Prices saw a 7% rise in the previous session, rebounding from its weakest level since June 2020 hit earlier in the week.

Natural gas prices are still set for a more than 11% decline this month, its fourth straight monthly decline and its longest losing steak since March 2020, affected by a mild winter that has left stockpiles well above normal, while output remained near record levels despite an Arctic freeze in January that briefly cut output and sent gas demand to a record high.

LSEG said gas output in the U.S. Lower 48 states rose to an average of 105 billion cubic feet per day (bcfd) so far in February, up from 102.1 bcfd in January, but still short of the monthly record high of 106.3 bcfd in December.

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 smaller-than-usual 88 billion cubic feet (bcf) of natural gas out of storage last week, a Reuters poll showed on Wednesday. The forecast for the week ended Feb. 23 would cut stockpiles to 2.382 trillion cubic feet (tcf), about 12% above the same week a year ago and about 27% above the five-year average.

“I think (the market) is waiting to see what storage is going to do; we’ve seen a lot of very low price, so markets are trying to see what the recovery is gonna look like as far as pricing is concerned,” said Kent Bayazitoglu, consultant at Baker & O’Brien.

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LSEG estimated 11 cooling degree days (CDDs) for the week as of Thursday, compared with 9 CDDs on Wednesday.

“Fundamentals don’t appear conducive to a price advance sustainable much beyond this week,” energy advisory Ritterbusch and Associates said in a note.

“While some supportive tweaks to the 1–2-week temperature views may have spurred some buying, this heating season is becoming advanced enough to curtail HDD accumulation capable of driving a storage surplus of 600 bcf or more next month.”

Market participants also kept a close eye on a wildfire that ripped across the Texas Panhandle. Several smaller wildfires at various stages of containment are burning other parts of the state’s northern Panhandle, whipped up by fierce winds and hot, dry weather.

On the other hand, a third of the U.S. faced the threat of severe weather as strong winds, snow and tornadoes threatened the Southeast, Ohio Valley and East Coast, while a fierce winter storm bore down on the Northwest.

Dutch and British wholesale gas prices were mixed, as the market approaches the last month of heating season with ample inventories and weak demand, and amid supply concerns due to an outage at U.S. Freeport LNG.

(Reporting by Anjana Anil and Swati Verma in Bengaluru; editing by Jonathan Oatis)