Natural gas experienced a significant rebound yesterday, increasing by 4.54% to close at Rs 315.3. This movement was influenced by a minor decline in production, strong inflows to LNG export facilities, and upward adjustments to short-term demand projections. The rally occurred in the face of forecasts indicating warmer-than-normal weather extending through mid-February, alongside anticipations of reduced demand in the upcoming week.

Average output in the Lower 48 states declined to 106.2 billion cubic feet per day in early February, a slight decrease from 106.3 billion cubic feet per day in January. This reduction is attributed to decreases in North Dakota and Wyoming, although it remains below the December peak of 109.7 billion cubic feet per day. In the interim, LSEG has forecasted that U.S. gas demand, encompassing exports, will decline from 159.7 bcfd this week to 143.4 bcfd in the following week.

Storage data indicated a draw of 242 bcf for the week ending January 23, surpassing expectations, which resulted in total stocks declining to 2.823 trillion cubic feet—7.9% higher than the previous year and 5.3% above the five-year average. The previous week experienced a modest withdrawal of 120 bcf. In the future, the EIA anticipates that U.S. dry gas production will achieve unprecedented levels of 108.8 bcfd in 2026 and 109.7 bcfd in 2027, even as domestic consumption experiences a modest decline. LNG exports are anticipated to increase to 16.4 bcfd in the upcoming year.

From a technical perspective, the market continues to experience short-covering, evidenced by a 1.56% decline in open interest, now at 11,385. Support is identified at Rs 300.8, with a further examination at Rs 286.2 if breached, while resistance is positioned at Rs 324.8, and an upward movement could lead to prices approaching Rs 334.2.