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Natural Gas Forecast: EIA Storage Surprise, European Price Drop Weigh
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EIA reports a 29 bcf natural gas storage build, Europe's LNG supply concerns underpin prices, and U.S. expects hotter temperatures through Aug 25.
Highlights
- U.S. storage at 3,030 Bcf, surpassing expectations.
- European gas prices recede from two-month high.
- U.S. faces intensified demand due to heatwave.
Overview
Natural gas futures experienced a mild uptick on Friday, trying to rebound from a significant 6% drop on Thursday. Despite the volatility, the commodity seems poised for a robust weekly closure. European gas prices, combined with U.S. storage dynamics, are major influencers in this narrative.
U.S. Storage Dynamics
Thursday’s slump in natural gas prices was influenced by the U.S. Energy Information Administration’s (EIA) report, which disclosed that utilities added 29 billion cubic feet (bcf) to storage in the week ending August 4. This build-up surpassed the anticipated 25-bcf increase and was in contrast with a 44 bcf increase the same time last year. Presently, the gas storage stands at 3,030 Bcf, significantly higher than last year and above the five-year average of 2,725 Bcf.
European Gas Prices Influence
European gas prices, specifically in the Dutch and British sectors, stepped back from their two-month peak. This came after apprehensions about limited liquefied natural gas (LNG) supply, owing to potential strikes at Australian facilities, began to wane. Ritterbusch and Associates, energy consultants, cited the uncertainty surrounding these strikes as a key reason for the subdued European prices, subsequently impacting U.S. prices.
Demand Forecasts and Weather Patterns
A surge in power demand is apparent in Texas, with air conditioning systems working in full swing due to an enduring heatwave. This spike is set to break previous records. Meteorological predictions suggest that temperatures across the U.S. will stay above average till August 25, intensifying the demand. Additionally, there’s a likely rise in U.S. gas demand to 104.6 billion cubic feet per day (bcfd) in the coming week, fueled by heightened consumption from power generators and increased exports.
Short-Term Forecast
The U.S. gas output has remained fairly consistent, hovering around 101.9 bcfd this August. However, the flow to major U.S. LNG export facilities has seen a minor drop. Factors like this combined demand and production scenario are exerting a bearish pressure on natural gas prices. Given the current trends, the natural gas market seems to be leaning towards a bearish sentiment, at least in the near future.
Technical Analysis
The current 4-hour price of Natural Gas at 2.786 shows a slight uptick from the previous 4-hour close at 2.780. This commodity is trading above both the 200-4H moving average (2.671) and the 50-4H moving average (2.636), suggesting a possible bullish momentum. The 14-4H RSI stands at 50.04, indicating that momentum is nearly neutral but leaning slightly positive.
The price is comfortably positioned between the main support area (2.542 to 2.487) and the main resistance area (3.027 to 3.091). In light of these indicators, the current sentiment in the Natural Gas market leans towards a bullish stance.
About the Author
James Hyerczykauthor
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.
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