U.S. Natural Gas Prices Slide Lower on Easing Demand

Texas (USA): The U.S. natural gas prices have shown a modest decline of 2.2 percent on Sep. 8, driven by the anticipated results of the government storage report. Factors responsible for this downtrend include sluggish demand in the following week and a pause in the noteworthy Australian strike at Gorgon and Wheatstone. As of September 1st, the price of natural gas stood at USD 2.63 per MMBtu, Ex-Louisiana. Meanwhile, weather conditions have also moderated as high temperatures have been replaced by mild and pleasant weather easing the demand of natural gas in the domestic market.

It has been previously reported that working natural gas in storage stood at 3,115 Bcf as of August 25, 2023, indicating a net storage increase of 32 Bcf compared to the previous week. Meanwhile, EIA (Energy Information Administration) is expected to publish its weekly report on energy storage and inventory levels. Projections suggest that natural gas inventory will increase by 38 Bcf by September 1st. Current U.S. natural gas storage is 484 Bcf higher compared to the previous year and 249 Bcf above the five-year average.

The futures of October natural gas experienced a significant decline of about 7.2 percent after the announcement that the workers' union at Chevron’s largest liquified natural gas facilities has halted their strike for a certain period. The reasons for postponing the dispute over pay and work culture have not been clarified yet. Chevron and The Offshore Alliance have been trying to reach an agreement, though the temporary halt has not signified any success over the dispute.

One of the world's largest liquified natural gas projects in Australia, powered by the joint ventures of Chevron and Wheatstone, contributes to over 7% of the global natural gas capacity. Substantial disruptions in these projects might cause severe supply issues. Australia, as the world's leading natural gas provider, has expressed concerns about these export disruptions.

Meanwhile, future gas contracts dropped by about 3 percent due to cooler-than-normal temperatures over the upcoming two weeks. However, the short-term forecast by Texas grid operator, ERCOT, has demonstrated hotter-than-normal temperatures that are expected to drive electrical demand. The current landscape shows a bearish movement in that prediction.

Australia has poised itself to be the world’s leading LNG supplier this year, potentially surpassing Qatar and the United States. However, the ultimate winner will be determined by current and future market dynamics, supply-demand scenarios, and global events. The natural gas price support region has been identified as the range between 2.542 and 2.487 per MMBtu, while resistance stands between 2.636 and 2.674 per MMBtu.