Natural gas prices experienced a significant increase, closing up by 4.93% at Rs 321.4, bolstered by a confluence of reduced output and enhanced expectations for demand driven by favorable weather conditions. Production in the Lower 48 states has moderated to an average of 109.0 bcfd thus far in January, a decrease from the record 109.7 bcfd observed in December.

Daily output is anticipated to approach a three-week low of 108.1 bcfd, attributed to reductions in significant producing areas including Texas and Arkansas. On the demand side, LSEG has adjusted its outlook upward, anticipating total gas demand, inclusive of exports, to increase from 131.2 bcfd this week to 132.4 bcfd next week. This adjustment is attributed to forecasts of cooler temperatures and heightened heating demand.

Exports continue to serve as a fundamental source of strength, as average gas flows to prominent U.S. LNG terminals increased to 18.6 bcfd in January, surpassing the record levels set in December. Storage data, however, exhibited relative softness, as the EIA reported a 38 bcf withdrawal for the week ended December 26, significantly below market expectations and historical averages. Anticipating future trends, the EIA projects that U.S. natural gas production and consumption will achieve unprecedented levels by 2025, highlighting a fundamentally strong outlook even amidst short-term fluctuations.

From a technical perspective, the market is undergoing short covering, as indicated by an 8.42% decrease in open interest. Prices exhibit support around Rs 312.2, with an additional downside buffer at Rs 302.9. On the upside, resistance is observed at Rs 327.2, and a sustained move above this level could potentially lead to Rs 332.9.