Natural gas is currently trading at $3.89 per MMBtu. The price is likely to find support around $2.75 area.
Key factors at play in the natural gas market –
- The natural gas price has crushed despite the lower level of inventories as weather outlook improved in the United States, however, recently, there has been extreme weather forecast in Europe.
- The United States and the European Union have agreed in principle in bringing U.S. LNG to Europe.
- China surpassed Japan as the biggest natural gas importer.
- Japan’s nuclear power generation is reviving again, which would curtail the LNG demand.
- Price in Europe declining sharply after breaking into record highs and currently trading at 65 pence therm. Russia and the United States are set to fight for market share in Asia and in Europe. US preparing to become major natural gas exporter to the EU and Asia.
- Large Natural gas producers in the United States continue to expand production per rig. US exports are increasing significantly. The United States remains the largest petroleum and natural gas producers in the world.
- U.S. production is rising fast. Currently, U.S. is the third biggest exporter of natural gas.
- U.S. exit from Iran nuclear agreement complicates the future of vast natural gas reserves in Iran. Recently, French energy giant ‘Total’ exit lucrative Iran gas project amid sanctions. However, so far, China has filled the gaps.
- Europe and Russia considering energy payments in euro.
- Russia and Iran are likely to dominate the Chinese gas market, fastest growing in the world.
- With natural gas turning into a buyers’ market, big importers like Japan are renegotiating long-term contracts with a resale clause attached.
Now, for the inventory,
According to the latest numbers, working gas in underground storage remains at 2.725 trillion cubic feet (Tcf). Stocks are 623 Bcf less than last year at this time and 647 Bcf below the five-year average. The chart from EIA shows the level of inventory. The second chart from investing.com shows weekly changes in inventory.
- Last week, the inventory declined by 48 billion cubic feet against an expectation of 52 billion cubic feet decrease. Today 46 billion cubic feet draw expected.
- EIA will release the inventory report at 15:30 GMT.
