Natural gas futures on MCX dropped more than 6% to around ₹274 per mmBtu, tracking weakness in global prices amid fresh weather outlooks and shifting demand expectations.
1. El Niño outlook signals milder winter risk
The latest update from the NOAA’s Climate Prediction Center has raised the probability of an El Niño event forming by September to 61%. An El Niño pattern typically brings milder winters across much of the US, which can significantly reduce heating demand for natural gas.
Markets are reacting early by pricing in downside risk for the upcoming winter season. If temperatures remain warmer than normal, residential and commercial gas consumption could soften, pressuring futures.
2. Profit booking after recent volatility
Globally, natural gas futures had already declined for a second consecutive week despite brief rebounds. Traders appear to be locking in positions amid uncertainty over weather, demand, and export trends.
3. Storage data tight, but short-term sentiment weak
US working gas in storage stands near 2,214 bcf after a heavy 249 bcf withdrawal, leaving inventories about 130 bcf below the five-year average. Structurally, this is not an oversupplied market. However, near-term weather expectations are dominating sentiment.
Henry Hub spot prices near $3.15 per mmBtu suggest a relatively balanced short-term market, but futures are adjusting to forward-looking demand risks.
4. LNG exports supportive, but not enough
US LNG export flows remain near record levels at around 18.5 bcfd, providing structural support. However, with domestic heating demand potentially moderating and policy shifts globally influencing long-term LNG demand, traders remain cautious.