Impact of Production Reduction
Major Appalachian drilling firm EQT has significantly slashed its output by 1 billion cubic feet per day since late February, accounting for about 15% of its total production. This reduction is anticipated to persist through March, with future plans contingent on a subsequent review. Chesapeake, another major player, has adopted a similar approach. Following these cuts, natural gas prices have seen an approximate 25% rise since February 20, which marked a historic low when adjusted for inflation.
Weather Influences on Natural Gas Prices
Despite warmer trends over the recent weekend and the last 24 hours, natural gas prices have shown resilience. This is largely attributed to reduced U.S. production announcements. Current forecasts predict extremely light national demand for the coming 13 days, reverting to seasonal norms around March 18-19. With expectations of mild weather across central, southern, and eastern U.S., demand is projected to remain low, with a slight uptick anticipated next weekend.
Market Anticipations and Short-Term Outlook
While production cutbacks are expected to lend some support to prices, the impact of these reductions on near-term storage levels might be limited. Consequently, any price gains could be restrained.
The forthcoming EIA storage report, scheduled for Thursday, could place further downward pressure on natural gas futures, especially if it reveals a minor drawdown or an unexpected increase in storage.
In the short term, this intricate balance between production decreases, mild weather conditions, and storage trends hints at a potentially bearish trend for the natural gas market following the storage report.
