Natural gas experienced an increase of 2.8%, closing at Rs. 282.30. This rise is attributed to a recent downturn in US natural gas production, with average output in the Lower 48 states decreasing to 110.0 billion cubic feet per day in November, down from 113.4 bcfd in October and a peak of 115.0 bcfd in August. Daily production was also on track to decline to a five-month low of 108.1 bcfd, offering near-term support to prices.
However, the presence of comfortable storage levels alongside expectations of ongoing supply growth constrained the potential for upward movement. US energy companies increased natural gas storage by 80 billion cubic feet during the week ending October 23, surpassing market expectations of 75 bcf. This brought total inventories to 3.724 trillion cubic feet, which is 3.8% lower than the levels from a year ago but 1% higher than the five-year average. The EIA projected US dry gas production to increase to 112.2 bcfd in 2026 and 116.1 bcfd in 2027, while domestic consumption is expected to reach 92.4 bcfd and 93.8 bcfd, respectively. LNG exports are projected to increase to 17.6 bcfd in 2026 and 18.6 bcfd in 2027, which may bolster demand.
Goldman Sachs has revised its 2027 NYMEX natural gas price forecast downward to $2.80 per MMBtu from $3.50. This adjustment is attributed to increased production in the Permian Basin and the anticipation that US supply growth will surpass demand growth by over 2 bcfd. The bank anticipates that the market will continue to be adequately supplied in the short term, suggesting a bearish perspective for the medium term. Meanwhile, average gas flows to major US LNG export terminals decreased to 17.7 bcfd in November from 18.4 bcfd in October, contributing to concerns regarding near-term demand.
Technically, the market is experiencing short covering, with open interest decreasing by 4.51% to 51,912 contracts, while prices rose by Rs. 7.70. This suggests that the recovery was largely fuelled by the covering of existing short positions. Natural gas is finding support at Rs. 274.50; should prices fall below this level, they may test Rs. 266.50. Conversely, resistance is established at Rs. 287.00. A sustained move above this level could push prices toward Rs. 291.50.
