Natural Gas Forecast: EIA Storage Report Dampens Early Session Rally

Highlights

• Natural Gas Prices Drop on Large Storage Build
• Freeport LNG’s Return Fails to Boost Natural Gas
• Natural Gas Market Bearish Despite Colder Weather Forecast

Overview

Natural gas prices are down shortly after the mid-session following a government report that showed a larger-than-anticipated storage build. Traders seem to be shrugging off the revised forecasts indicating colder weather and higher heading demand over the next week than previously expected.

At 16:50 GMT, Natural Gas is trading $2.162, down $0.018 or -0.83%. The United States Natural Gas Fund ETF (UNG) is at $7.01, up $0.02 or +0.29%.

Data provider Refinitiv, projected a significant surge in demand over the next two weeks, which was greater than what was predicted yesterday afternoon. Additionally, the return of Freeport LNG’s plant in Texas following an eight-month outage in February was also a bullish factor. Nonetheless, the potentially bullish developments weren’t enough to offset the bearish government storage data.

LNG Export Flow at Record High

The amount of gas flowing to liquefied natural gas (LNG) export plants remained on track to hit a record high for a second consecutive month in April, potentially bullish for natural gas prices.

Storage Build Exceeds Forecasts

The U.S. Energy Information Administration reported that utilities added 75 billion cubic feet of gas to storage last week, exceeding the 69-bcf build analysts had forecast in a Reuters poll. However, the market has been extremely volatile over the past month, with the front-month gaining or losing over 5% on 11 of the past 21 trading days.

US Natural Gas Production Rises in April, But Drops in Recent Days

Refinitiv reported that gas production in the Lower 48 states of the U.S. increased to an average of 100.2 billion cubic feet per day (bcfd) in April, up from 99.7 bcfd in March, but slightly below the record high of 100.4 bcfd in January.

However, daily production decreased by approximately 2.3 bcfd in recent days, reaching a preliminary low of 98.4 bcfd on Thursday due to drops in Pennsylvania and West Virginia.

It should be noted that initial data may be subject to revision later in the day. According to meteorologists, colder than usual weather is expected to persist in the Lower 48 states until May 5th.

Refinitiv predicted that gas demand, including exports, would rise from 95.6 bcfd this week to 96.8 bcfd next week as temperatures are expected to decrease. While the forecast for this week was lower than Refinitiv’s earlier outlook on Wednesday, the forecast for next week was higher.

Technical Analysis

From a daily technical viewpoint, Natural Gas is trading on the weak side of its daily pivot at $2.353, but above the nearest support at $1.904. The long-term technicals are bearish, but the short-term outlook indicates a developing upside bias.

A sustained move over the pivot at $2.353 will indicate the buying is getting stronger. This could lead to a near-term acceleration to the upside with R1 at $2.727 the nearest target. However, a sustained move under Pivot at $1.904 will indicate the short-term selling pressure is getting stronger with a retest of the multi-year low at $1.904 the next likely target.

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