Mixed demand outlook and lower production impact prices
Natural gas futures rose a few cents early Tuesday as traders factored in mixed signals from the latest weather forecasts and production data. NatGasWeather’s forecast pointed to moderate national demand through Friday, with stronger demand expected over the weekend due to warmer than normal conditions across much of the U.S. That contrasts with milder conditions in the north and east, which are likely to dampen overall demand.
Despite these forecasts, the natural gas market is struggling with an oversupply that continues to depress prices. Major producers such as EQT and Coterra Energy have begun to cut production, delay new drilling projects and the connection of oil wells to pipelines. These cuts are in response to persistently low prices, which have rarely been this low during peak summer demand.
Production decline due to storage problems
Natural gas production in the Lower 48 states has declined from its peak in July. Current figures show production at about 101 billion cubic feet per day (bcf/d), compared to over 103 bcf/d last month. UBS analysts attribute the recent price drop to the risk of storage over-congestion, which increased as production increased in July. The market was further pressured by a temporary reduction in liquefied natural gas (LNG) exports due to Hurricane Beryl, but exports have since recovered.
Market forecast: cautious optimism for 2025
Looking ahead, UBS analysts maintain their cautiously optimistic forecast for natural gas prices in 2025, assuming normal winter conditions. However, they warn that a milder-than-expected winter could dampen the expected price recovery. The expected increase in LNG export capacity from terminals such as Plaquemines and Corpus Christi should lead to stronger demand and potentially tighter market balances in the coming years.
Although short-term conditions suggest continued volatility, the overall market could experience a more sustained recovery as export capacity increases and production adjusts to demand.
