Updated Sep 25, 2024
9/25/24
Lower production and a narrowing storage surplus fell short of countering forecasts for mild fall weather, leaving natural gas forward prices to probe lower.
Lower production and a narrowing storage surplus fell short of countering forecasts for mild fall weather, leaving natural gas forward prices to probe lower.
Another attempt by market bulls to pull October Nymex natural gas futures higher ran into a wall Wednesday afternoon as bears resumed control. The market had a muted response to the Federal Reserve’s (Fed) interest rate cut decision while moving lower on weaker demand.
The Federal Reserve (Fed) is on the cusp of its first interest rate reduction since the onset of the pandemic in early 2020, a move that would lower borrowing costs and potentially bolster natural gas infrastructure development.
Weak natural gas prices through most of 2024 challenged the industry’s profitability, but they helped to dramatically ease the pace of U.S. inflation and, by extension, nudged the Federal Reserve (Fed) to the doorstep of interest rate cuts.
Federal Reserve (Fed) policymakers left their benchmark interest rate unchanged and near the highest level of this century – where it has held since mid-2023 – amid lingering inflation worries.
Federal Reserve (Fed) policymakers on Wednesday, citing the resilience of the U.S. job market and broader economy, left interest rates at elevated levels. This, in turn, could deter borrowing and new investment at a time when natural gas producers are bracing for long-term growth to meet a surge in global LNG demand.
Natural gas futures on Thursday rallied for a fourth consecutive session, bolstered by a bullish storage print that came on the heels of hotter weather and lower production. The July Nymex gas futures contract settled at $2.533/MMBtu, up 19.1 cents day/day. August jumped 19.6 cents to $2.609.
Weakened natural gas prices – following a massive run-up last summer – intersected with rising interest rates to ease inflation that had only a few months ago reached a 40-year high.
With inflation surging, led by lofty oil and natural gas prices in 2021, Federal Reserve policymakers this week said they would hasten their drawdown of pandemic aid and signaled they could raise interest rates multiple times in 2022.