The price of natural gas contracts in the United States went up slightly on Friday 5th of April. The reason for this expectation is that companies are drilling for natural gas less often.
Natural gas prices went up even though there were signs of less demand. These signs included predictions of milder weather next week, lower demand forecasts than before, and recent price drops for gas and electricity in some areas. There’s also plenty of gas stockpiled.
Natural gas futures for May delivery went up 1.10 cents (0.60%) to settle at $1.785 per million BTU (British Thermal Units). On Thursday 4th of April, the contract had closed at an all time low since 28th of March.
May natural gas futures ended the week roughly 1% higher. This marks the third consecutive weekly gain, which hasn’t happened since June of last year.
Experts estimated that natural gas reserves were significantly higher than usual for this time of year, sitting at around 37% above normal levels.
This year’s plunge in natural gas prices to a low not seen in three and a half years has discouraged gas drilling companies. In response, they’ve reduced the number of drilling rigs operating in major gas production areas like the Haynesville shale region that covers parts of Louisiana, Texas, and Arkansas.
An industry report by Baker Hughes revealed that the Haynesville shale region saw a significant decrease in drilling activity during the week (31st of March – 6th of April). Two rigs were removed, bringing the total number of active rigs down to just 34, which is the lowest level since August 2020.
Chesapeake Energy and Southwestern Energy’s merger deal hit a snag. The $7.4 billion merger, originally planned to close earlier, has been delayed until the second half of 2024. This delay is due to a request for more information from a U.S. regulator, and it’s the second time they’ve asked for additional details.
There were still power outages affecting more than 331,000 homes and businesses in the northeastern United States on Friday, according to PowerOutage.us. Most of the outages were concentrated in Maine. This number represents an improvement from Thursday afternoon when around 645,000 were without power.
When there are power outages, the demand for natural gas dips, at least for a short while. This is because power plants that rely on natural gas to generate electricity wouldn’t need to burn as much fuel during outages.
A strong earthquake, measuring 4.8 on the magnitude scale, hit close to New York City on Friday 5th of April according to the US Geological Survey. The quake caused buildings to tremble across the East Coast, catching residents off guard in a region that uncommonly feels significant earthquakes.
Power grids across the United States were gearing up for a coming solar eclipse on Monday, April 8th. This total eclipse, stretching across several states, will cause a sudden drop in solar power generation that needs to be compensated for by the grid.
Natural gas prices in West Texas plunged again. At the Waha Hub, a key trading hub in the Permian Basin, gas prices dipped below zero for the third time in a month. This signifies negative prices in the spot market, where gas is traded for immediate delivery.
Experts at Colorado State University are predicting a very busy Atlantic hurricane season for 2024. Interestingly, hurricanes can have opposing effects on natural gas prices, causing them to either rise or fall.
Hurricanes can be a double-edged sword for natural gas prices. On the one hand, if they cause widespread power outages, demand for gas used in electricity generation plummets, driving prices down. However, if they strike gas-producing regions directly, they can damage wells, pipelines, and other infrastructure, leading to supply disruptions and price hikes.
Natural gas production in the continental US (excluding Alaska and Hawaii) has dipped in April. According to financial firm LSEG, average daily output so far that month was down to 99.1 billion cubic feet (bcfd) compared to 100.8 bcfd in March. This follows a record high of 105.6 bcfd set in December of last year.
Weather forecasts for the continental US (excluding Alaska and Hawaii) predicted cooler than usual temperatures until April 7th. After that, a shift was expected, with temperatures trending warmer than normal between April 8th and 20th.
A rise in temperatures is expected across the continental US (excluding Alaska and Hawaii). This will lead to a drop in natural gas demand, according to LSEG’s forecast. They predict demand (including exports) to fall from 104.3 billion cubic feet per day (bcfd) this week to 102.5 bcfd next week, and then down to 97.4 bcfd in two weeks.
