Natural Gas Forecast: Prices Rise Ahead of EIA Weekly Storage Report

Natural Gas Highlights

• Natural gas prices increase prior to weekly storage report
• U.S. utilities added 108 bcf of natural gas to storage last week
• Warmer weather projections and higher demand expected in the coming weeks

Natural Gas Overview

Natural gas is edging higher on Thursday shortly before the release of the government’s weekly storage report.

At 13:15 GMT, Natural Gas is trading $2.349, up $0.054 or +2.35%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $6.90, up $0.04 or +0.58%.

Wednesday Recap

On Wednesday, U.S. natural gas futures ended a three-session winning streak due to the anticipation of a larger-than-anticipated increase in gas inventories. This price decline occurred despite predictions of warmer weather and slightly higher demand than previously expected.

According to data from Refinitiv, the next two weeks are projected to have a higher-than-normal number of cooling-degree days, which indicates increased demand for cooling due to higher temperatures. The expected count is 106, compared to the 30-year average of 95. Additionally, Refinitiv reported that the average gas output in the U.S. Lower 48 states during May was 101.4 billion cubic feet per day (bcfd).

US Energy Information Administration Weekly Storage Report

The recent weather has brought about warmer temperatures, which has resulted in an increase in natural gas supply exceeding 100 billion cubic feet. As a result, the market has experienced a slight decline. According to a survey conducted by Reuters, 16 analysts predict that U.S. utilities have added a significant 108 billion cubic feet (bcf) of natural gas to storage in the past week. This is higher than the 87 bcf injected during the corresponding week last year and surpasses the five-year average increase of 91 bcf (2018-2022). The US Energy Information Administration Weekly Storage Report (EIA) will be released at 14:30 GMT.

Short-Term Weather Forecast

According to the forecast from natgasweather.com for May 18-24, there will be an ongoing active weather pattern across the United States. This will involve weather systems moving across the country, bringing showers, thunderstorms, and pleasant temperatures ranging from the 60s to 80s, resulting in relatively low national demand for natural gas. However, this pattern will be different for the West Coast states, as they will experience strong high pressure, leading to higher temperatures in the 80s-90s, and potentially breaking local temperature records. The coolest temperatures are expected in the Upper Great Lakes and Northeast regions on Wednesday and Thursday, as a weather system passes through, causing temperatures to drop into the 30s and 40s.

Technical Analysis

Natural gas is hovering near a two-week high. It’s also on the bullish side of the daily pivot at $2.168 on Wednesday.

Its current chart pattern has put it in a position to test the next target level at $2.432 (R1). This could act like resistance on the first test. However, it’s also a potential triggerpoint for an acceleration to the upside with $2.638 (R2) the next target.