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Natural Gas - Close But Not Yet
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Natural Gas - Close But Not Yet

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HFI Research
Dec 19, 2023
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Natural Gas - Close But Not Yet
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Oh, we are so close to turning the completely bearish sentiment around in natural gas... at least for the short term. The latest weather update shows the possibility of colder-than-normal weather on the horizon.

But the issue that the market keeps running into is that while the back-end of the outlook gets more bullish, the near-term outlook is getting worse.

We saw meaningful losses in heating demand over the 6-10 day period.

6-10 Day

The issue with the natural gas market today is that 1) Lower 48 gas production remains very elevated and 2) storage remains bloated. So any short-term losses in heating demand directly translate into lower storage draws, which implies higher overall storage levels. 

And looking at our latest storage projection, you can see that we are still expecting total storage draws to be ~140 Bcf less than the 5-year average.

EOS has marginally moved lower to ~2 Tcf, but it's still well above the 5-year average of ~1.7 Tcf.

On a supply/demand basis, the natural gas market is ~5.75 Bcf/d oversupplied. Adjusting for weather, we are still looking at ~2 Bcf/d of oversupply assuming ~104.5 Bcf/d of production.

How bullish does it need to get?

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