By Ketki Saxena
Investing.com — As of 2:00 p.m ET, Natural Gas futures were trading at $5.55, or down 1.09% in the day’s trading.
Natural gas prices were trading slightly lower due to:
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Volatility ahead of April contract expiration today, and final settlement tomorrow
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A modest capital exit from the energy sector, following lower oil prices this morning
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Expectations of slightly warmer weather in the coming days,
However, fundamentals for NG remain robust, underpinned by concerns about supply globally
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Ongoing supply concerns from Russia, exacerbated by last week’s demand and continued insistence from the Kremlin that unfriendly countries pay for gas in the Ruble
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Robust demand for U.S. LNG exports, including the latest deal to supply gas to the EU
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Low U.S. productions, and declining inventories
As per EBW Analytics Group senior analyst Eli Rubin, falling oil prices likely contributed to the drop in nat gas futures, after a “modest capital exit from the energy sector”. Rubin also noted that “The April contract options expiration today and final settlement tomorrow may dominate trading over the next two sessions”.
Fundamentals for NatGas, however, continue to be driven by global supply concerns. Gas from the U.S, a top global producer of natural gas, remains in high demand, buoyed by last week’s agreement for the U.S. additional 15 billion cubic meters of LNG to the EU. However, the U.S. is already producing LNG to maximum capacity, and will not be supply enough LNG to adequately cover the shortage from Russia.
While demand for U.S. natural gas soar, production is close to its maximum capacity, and supplies are running low.
As per the Energy Information Administration (EIA) report last Thursday, the U.S. utilities withdrew 51 Bcf (billion cubic feet) of natural gas from storage for the week ended March 18. Natural Gas Intelligence notes that the remaining inventory is at 1,389 Bcf, leaving reserves well below the five-year average of 1,682 Bcf.
U.S. natural gas production has also declined since the onset of the Ukrainian invasion, adding to overall global supply concerns. However, production from Canada and Mexico may help mitigate a potential shortfall from the U.S.
Volatility around natural gas in recent weeks has been driven by the Russian-Ukrainian conflict and was exacerbated by last week’s demand from Putin that unfriendly countries pay for Russian gas in the Ruble. This demand is tricky for EU nations, who as per sanctions are no longer dealing with Russian assets, and who remain principally opposed to leading the Ruble higher and shoring up the Russian economy.
While EU nations consider this demand illegal as per existing contracts, Russia is expecting a proposal from EU nations by March 31st.
All currencies USD, unless noted otherwise.