On Thursday, US natural gas futures experienced a decline, falling below $3.6/MMBtu, following the EIA's report of a smaller-than-expected storage withdrawal of 40 billion cubic feet (bcf) for the week ending January 3, 2025. This withdrawal was significantly lower than the 53-bcf forecast and also well below the five-year average of 93 bcf for this period.

Impact of Mild Weather

The reduced storage withdrawal can be attributed to the mild weather during the New Year's holiday period, which led to lower-than-expected demand for natural gas for heating. Typically, the winter season sees an uptick in gas consumption, but the relatively warmer weather reduced the need for heating, leading to less strain on storage and ultimately lower prices.

Gas Production and Future Forecast

Another factor affecting the natural gas market is the production levels. Despite the mild winter, gas production has shown smaller declines than in previous winters, which has helped keep the market more balanced. However, the forecast for colder weather in the latter half of January may lead to increased freeze-offs, which would reduce gas production and potentially drive prices higher. Freeze-offs occur when freezing temperatures cause production facilities to shut down temporarily, leading to supply disruptions.

Strong LNG Exports

On the other hand, US LNG exports have remained robust, with flows to US export plants averaging 15.0 billion cubic feet per day (bcfd) in January. This figure surpasses the December 2023 record of 14.7 bcfd, driven by strong global demand for liquefied natural gas. The continued strength in LNG exports has provided some support for the natural gas market, helping to offset some of the bearish factors related to domestic consumption.

Market Volatility

Despite the downward trend in US natural gas prices, volatility in the market remains high. Over the past 11 trading days, there have been price swings exceeding 5% on ten of those days, which is significantly higher than the average 3.7% daily move seen in 2024. This level of volatility highlights the uncertainty in the market, driven by fluctuating weather forecasts, production levels, and demand for natural gas.

Conclusion

The recent dip in US natural gas prices below $3.6/MMBtu is primarily due to the smaller-than-expected storage withdrawal for the week ending January 3, exacerbated by mild weather reducing gas demand. However, the strong performance of LNG exports, which reached new records in early January, has provided a degree of support to the market. With colder weather expected through January 23, there may be a potential for freeze-offs that could affect production and lead to increased price fluctuations. Investors will likely continue to monitor weather conditions, production levels, and global LNG demand, as these factors will play a crucial role in shaping the direction of US natural gas prices in the coming weeks.

The Upcoming IPOs in this week and coming weeks are Sat Kartar Shopping,Barflex Polyfilms and Laxmi Dental.

The Current active IPO are Standard Glass Lining, Quadrant Future, Capital Infra Trust, Delta Autocorp, Avax Apparels, B R Goyal.