US natural gas futures experienced a significant decline of more than 3.5%, settling below $2.9/MMBtu on Friday. This downturn follows a three-month peak close to $3, driven primarily by an ongoing surplus supply. The Energy Information Administration (EIA) rorted that utilities injected 55 billion cubic feet (bcf) of gas into storage for the week ending Stember 27. This figure fell short of analyst expectations of 57 bcf and marked a significant decrease compared to the 87 bcf injected during the same week last year. As a result, US gas inventories now stand at 3,547 Bcf, with the five-year surplus narrowing to 5.7%.
Despite the recent price drops, analysts indicate that lower supplies heading into the winter months could trigger a recovery in prices. This situation is exacerbated by a notable slowdown in drilling activities this year. Furthermore, demand for natural gas is poised to increase, bolstered by the resolution of a significant longshoreman strike, which had raised concerns about decreased consumption from petrochemical production. However, it is important to note that clearing the cargo backlog at East Coast and Gulf Coast ports will require significant time.
Since the start of 2024, natural gas prices have risen by 0.42 USD/MMBtu, reflecting a 17.97% increase. Current trading on a contract for difference (CFD) suggests that natural gas is projected to reach $3.04/MMBtu by the end of this quarter, according to global macro models and analysts’ expectations. Looking ahead, the forecast indicates a potential trading price of $3.54 in the next twelve months.