US Natural Gas Prices Break Longest Losing Streak Since 2020

The US natural gas market has experienced a significant shift as prices ended their longest monthly losing streak since 2020. This change comes after an El Niño winter swept across the Lower 48, leading to a decrease in demand and an increase in storage levels, which in turn caused prices to drop in recent months. However, there are now indications that the market may be reaching its lowest point.

First Monthly Gain Since October

April saw the first monthly gain since October, with a nearly 13% increase, breaking the longest losing streak in over four years. From mid-February to late April, prices were stagnant around $1.50/MMBtu, with resistance around the $2 mark. However, prices have surged above $2 since last week.

Reasons for Bullish Price Action

One of the reasons for this bullish price action is the market's expectation of warmer weather across the Lower 48. Peak summer is in mid-July, a time when households and businesses increase their use of air conditioning, which in turn increases power demand from natural gas-fired power plants. FXStreet also noted that prices are rising due to a higher war risk premium, as "Israel is starting an offensive in Rafah."

Effect on NatGas Storage

The warmer weather is expected to help reduce the record levels of natural gas storage in the US. The end of the withdrawal season saw the following figures: 2019: 1.107 trillion cubic feet (tcf) 2020: 1.986 tcf 2021: 1.750 tcf 2022: 1.386 tcf 2023: 1.830 tcf 2024: 2.259 tcf The 2.259 tcf figure is the highest in years for the US, largely due to mild winter weather.

NatGas Fundamentals

On Monday, Goldman's Samantha Dart provided clients with an overview of the natural gas fundamentals in the US. The main takeaway is that while storage levels are high, production is declining due to ongoing maintenance. Dart also noted that the demand for natural gas in power generation remains high. In a separate note last week, Dart said that increasing power demand for data centers "might not change much for US gas prices."

Good News for US NatGas Prices

The good news for US natural gas prices is that LNG exporting capacity is expected to increase next year. This suggests that natural gas prices have likely reached their lowest point.

Final Thoughts

The recent shift in the US natural gas market is certainly noteworthy. After a lengthy losing streak, prices appear to be rebounding. What do you think about this development? Is this a sign of a more robust recovery, or just a temporary shift? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.