RBC Highlights Support for U.S. Natural Gas Prices Amid Cold Weather Wave

A report prepared by RBC Capital Markets indicates that U.S. natural gas prices remain supported due to cold weather conditions and increasing demand for liquefied natural gas (LNG) feed gas. The latest 8-14 day forecast shows that the cold snap will persist, primarily affecting the eastern U.S. This situation has shifted investor attention to how the supply side might respond to potential price increases.

Current demand for natural gas is strengthening, and while high prices may trigger some supply responses, particularly from drilled but uncompleted wells (DUCs) and previously curtailed production, the trend of producer consolidation is expected to balance significant production increases. Public companies, showing a stronger commitment to capital discipline, are likely to avoid substantial production increases even if prices rise. This trend is evident in the reduction of rig counts in key regions such as Marcellus, Utica, and Haynesville, where 20 rigs have been cut, with 19 of these reductions made by public companies.

In the most recent weekly storage inventory report, a withdrawal of 116 billion cubic feet (Bcf) was recorded. RBC assessed this figure as a bearish indicator since it fell below the consensus median expectation of 128 Bcf withdrawal. However, this withdrawal was greater than both the five-year average of 104 Bcf and the 35 Bcf withdrawal from the same week last year.

Looking ahead, RBC predicts that the next report may show a withdrawal in the range of 65-70 Bcf, slightly below the typical seasonal norm of 70-90 Bcf. The firm also notes that holiday scheduling may impact these figures.