Natural gas price outlook as the US summer season approaches

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on May 20, 2022
  • Natural gas price remains on an uptrend with $7.00 being a steady support zone for over a month now.
  • Even with the pullback, it will likely remain on the rise with the US summer season in the horizon.
  • Inventories remain below the five-year average.

Natural gas price remain steady above the previously evasive one of $7.00 per a million British thermal units (MMBtu) despite the recorded pullback. As at the time of writing, it was at $8.12. Tight supplies and high demand are the market’s key bullish drivers.

natural gas price
natural gas price

Bullish drivers   

While natural gas price is still on an uptrend, it has eased on Friday’s session following the higher-than-expected rise in US inventories. The EIA data, which was released on Thursday, indicated that the amount of working gas in US storage facilities rose by 89 Billion cubic feet (Bcf) for the week ending on 13th May.  

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The figure came in slightly above the analysts’ forecast of a 87 Bcf increase. Indeed, the rise in stocks is largely behind the pullback in natural gas price. Even so, the inventories are still 358 Bcf below the amount recorded at the same time in 2021. Besides, they are 310 Bcf below the 5-year average of 2,042 Bcf.

Ordinarily, the spring season in the US is characterized by lower natural gas price amid a decline in demand. With favorable weather conditions, there is usually reduced need to heat commercial and residential spaces. As such, LPG traders and producers take advantage of the period to build up on the stockpiles ahead of summer.

 Notably, this year’s spring has been rather different. A year ago, US natural gas price was at around $3.00 as the spring season’s average temperatures lowered demand. Since then, it has more than doubled. About two weeks ago, it rose to $9.03; its highest level since August 2008. While profit-taking has led to a pullback, it is still steady above $7.00, a level that has been a crucial support zone for over a month now. Interestingly, that had been an evasive zone for 14 years.

The heat wave experienced in the South is one of the factors that have led to a hike in natural gas demand at a time when producers ordinarily build on inventories.Weather is set to be a huge influencer of natural gas price into the coming weeks. During the summer period that will run between June and August, the National Oceanic and Atmospheric Administration forecast that most of the regions within the US will experience above-normal temperatures and below-average rainfall.

In addition to the US weather, the ongoing Russia-Ukraine war will remain a bullish driver for the commodity in the ensuing sessions. While US liquefied natural gas (LNG) exports dropped by 8% in April, Europe remains the top destination for the commodity. As the continent seeks alternatives to its Russian imports, the US has been one of its eyed sources. In April, the region accounted for 64% of the US LNG exports.

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