Natural Gas Forecast: Prices Surge Amid Soaring Temperatures

Highlights

• Texas heat wave spurs power demand.
• LNG export facilities anticipate winter surge.
• Production expected to plateau till 2024.

Overview

US Natural Gas futures are showing promising signs, trading at $2.816, up 1.11% as of 10:45 GMT. Surging heat waves and rising demand are primarily driving the optimistic trend.

Weather Patterns Fueling Demand

As temperatures soar, especially in Texas, air conditioning units are working overtime, creating a spike in power demand. Texas saw an unprecedented power demand on Monday, with forecasts suggesting another record-breaker this week.

Meteorologists predict the hot spell across the Lower 48 states to persist until at least August 23. The southern regions will experience highs ranging from the upper 80s to 110s, while the northern areas will see showers with temperatures between the 70s and 80s. As high pressure builds up, the East is expected to heat up into the mid-80s to mid-90s over the weekend.

Supply Dynamics & Exports

Warmer weather conditions in populous states and the sustained heat in Texas bolster the natural gas market. Moreover, with winter on the horizon, LNG export facilities are preparing for heightened demand, offering stability to prices.

Notably, despite the rising demand, there’s an anticipation of a production plateau, hovering around 100 billion cubic feet daily till 2024 due to drilling CapEx cutbacks.

On the export front, Refinitiv’s data suggests an uptick in U.S. gas demand, forecasting it to jump from 101.8 billion cubic feet per day (bcfd) to 105.2 bcfd next week. Although gas flows to major US LNG export plants have seen a slight dip this month, primarily because of reductions at Cheniere Energy’s Sabine Pass, the overall market remains resilient.

Bullish Short-term Forecast

The scenario spells bullish for the Natural Gas futures. Rising temperatures, coupled with a balance in supply and demand dynamics, hint at a promising trajectory for the US Natural Gas market in the coming weeks.

Technical Analysis

The current 4-hour price of Natural Gas stands at 2.814, which reflects an upward momentum from the previous 4-hour close at 2.785.

When compared to the 200-4H moving average (2.662) and the 50-4H moving average (2.627), the commodity is currently trading above both, indicating  bullish sentiment. The 14-4H RSI reads at 73.15, placing the commodity in the overbought territory, suggesting potential cautiousness for buyers.

In terms of support and resistance levels, the commodity hovers inside its main resistance area of 2.782 to 2.836, suggesting that breaking this could further strengthen its bullish trend. In light of the indicators, the market sentiment for Natural Gas on a 4-hour chart appears bullish.