Harvest Global Markets :

The U.S. natural gas futures market is currently below $2.950 as of Friday. However, in the preceding session, there was a 1% uptick in futures. This increase was influenced by an unexpected withdrawal from gas storage and the anticipation of heightened heating demand due to colder weather forecasts. The rise occurred despite a consistent supply to liquefied natural gas (LNG) export plants.

The Energy Information Administration (EIA) reported a withdrawal of 7 billion cubic feet (bcf) from storage in the week ending November 17, which contrasts with the expected addition of 7 bcf. This deviation from both last year’s and the five-year average figures indicates a shift in heating demand. Following the EIA report, the price of front-month gas futures for December on the New York Mercantile Exchange rose to $2.874 per million British thermal units (MMBtu), rebounding from recent lows.

Despite this increase, the market’s response to high production levels and ample storage suggests tempered expectations for significant winter price surges. The current market scenario is influenced by record-high gas production in November and sufficient storage levels. Anticipated colder weather is projected to spike gas demand, including exports. Furthermore, the U.S. is positioned to become a leading global LNG supplier in 2023, supported by strong international demand.

In a separate context, Natural Gas is experiencing a decline this week due to a ceasefire deal in Gaza, reducing the risk of supply issues in the Middle East for both crude oil and natural gas. Simultaneously, frost is occurring on the European continent. However, gas storages remain filled at historically high levels and are expected to end winter at around 50%. Despite a one-day delay in the Gaza ceasefire until Friday, there is hope in the markets that this agreement could mark the beginning of a longer-term easing of tensions in the region.

Shifting focus to the currency market, the U.S. Dollar (USD) experienced a brief resurgence on Wednesday but relinquished its intraday gains near the U.S. closing bell. With the U.S. market closed for Thanksgiving, there is an expectation of limited counterweight in the U.S. trading session, potentially leading to a slight further weakening of the U.S. Dollar.

Moreover, Freeport LNG, a U.S.-based liquefied natural gas company, has obtained approval from the Federal Energy Regulatory Commission (FERC) for the full reactivation of its Phase II infrastructure at the Texas export plant. This includes the reinstatement of LNG Loop 2 and Dock 2 for ship loading, which had been offline for approximately eight months following a fire incident in June 2022. The resumption of the plant’s complete operational capacity is expected to augment LNG supply to global markets, particularly in anticipation of heightened demand during the upcoming winter season in the Northern Hemisphere. FERC granted approval following Freeport’s satisfactory resolution of the root causes of the incident and the progression of cool-down activities. The plant’s full capacity enables the processing of approximately 2.1 billion cubic feet per day of gas into LNG.

Considering the robust production, ample storage, and increasing demand prospects, especially for U.S. LNG exports, the near-term outlook for the U.S. natural gas market tends towards a cautiously bullish sentiment. The recent surprise withdrawal from inventories and the approach of cold weather supported Nymex December natural gas futures, which settled higher on the final trade day during the truncated Thanksgiving holiday workweek.

Bloomberg Intelligence has estimated that Europe is likely to conclude the cold season with reserves still near 45% full, alleviating the need for a pre-winter buffer. However, Malaysian energy group Petronas has encountered production issues at its export facility in Malaysia, leading to the delay of several LNG shipments to customers for December. Recent reports indicate that flows from Norway to Europe and the UK are exceeding the five-day average, as reported by Gassco. Overall LNG inflow for Western Europe aligns with the 30-day average.

Despite temperatures in various parts of Europe approaching 0° Celsius, gas storages in Europe remain elevated, near-full. Numerous cargo traders report a substantial surge in demand for LNG storage on the water, as European underground storage sites have reached full capacity.