Natural Gas Forecast: Cautious Trade Ahead of Weekend with Eyes on the Weather

Highlights

• Natural gas futures edge lower due to weather assessment and profit-taking.
• Forecasts indicate hot weather and increased demand in the coming weeks.
• EIA storage report, LNG flow, and weather patterns shape the natural gas market.

Overview

Natural gas futures are currently edging lower as traders assess the near-term weather situation, with profit-takers driving prices down earlier this week. The market saw a boost from a favorable EIA storage report on Thursday, but there was no follow-through on Friday. Looking ahead, forecasts indicate hot high pressure impacting the southern US and up the Mississippi Valley, resulting in strong demand. California will also experience hot weather, while the East warms up. Texas, on the other hand, will see a cooling trend over the weekend and next week.

Prices Rebound on Thursday

In other news, U.S. natural gas futures climbed around 1% on Thursday due to a smaller-than-expected weekly storage build and forecasts of increased demand in the coming weeks. Additionally, hotter-than-normal weather is expected to persist through mid-July, and there has been an increase in gas flow to LNG export plants after maintenance outages. Texas is experiencing high power use due to a heatwave, driving up gas consumption for power generation.

Friendly EIA Storage Build Supportive

The Energy Information Administration (EIA) reported a storage build of 76 billion cubic feet (bcf), slightly lower than analysts’ expectations. Gas output in the Lower 48 states has decreased in June, and meteorologists predict hotter-than-normal weather to continue through at least July 14. With the anticipated heat, gas demand, including exports, is forecasted to rise. However, gas flows to LNG export plants have decreased due to maintenance, impacting overall gas supply.

Furthermore, the U.S. Federal Energy Regulatory Commission (FERC) approved the restart of construction on the Mountain Valley natural gas pipeline, which is expected to enhance gas supplies in the Appalachia region.

Weather Patterns Set the Tone

Overall, the natural gas market is influenced by weather patterns, demand forecasts, storage data, and the operations of LNG export facilities.

Technical Analysis

The market sentiment for Natural Gas is cautiously bullish as the current 4-hour price of 2.733 shows a slight upward move from the previous close of 2.699.

The price remains above both the 200-4H moving average (2.434) and the 50-4H moving average (2.674), indicating a positive trend. The 14-4H RSI of 52.58 reflects a balanced sentiment.

However, the price is approaching the main resistance area at 2.998, which may pose a challenge for further upward movement. Monitoring price action around this level will be important. Overall, the market shows potential for continued bullishness, but the resistance area requires careful observation.

Additionally, a failure to hold the 50-4H moving average could trigger an acceleration to the downside.