Natural Gas News: Bullish Sentiment Builds as Traders Shift from Short to Long

U.S. Natural Gas Futures Movement

U.S. natural gas futures are lower early Tuesday, contrasting with a 15-week high reached on Monday when prices surged approximately 6% due to increased demand projections for the coming week. This recent fluctuation in prices comes amid changes in production levels, storage data, and weather forecasts impacting the energy market.

At 11:54 GMT, Natural Gas is trading $2.352, down $0.029 or -1.22%.

Supply Trends and Production Adjustments

Recent data indicates a slight decrease in gas output in the Lower 48 U.S. states, averaging 97.2 billion cubic feet per day (bcfd) in May, down from 98.1 bcfd in April. Despite a temporary rise in daily output due to maintenance completion on Texas gas pipelines, overall production remains about 8% lower in 2024 compared to last year. Major producers like EQT and Chesapeake Energy have scaled back drilling activities in response to falling prices earlier this year. However, the restoration of the Freeport LNG plant in Texas has increased gas flows to major U.S. LNG export plants, now averaging 12.7 bcfd in May.

Storage and Overbought Conditions

The amount of gas in storage continues to be significantly above normal levels, about 31% higher than typical for this time of year. This oversupply has been a contributing factor to the natural gas futures remaining in an overbought state for an extended period, marking a seventh consecutive day for the first time since April 2022.

Short-Term Forecast

With the recent shift in traders’ positions from net short to net long, as indicated by the U.S. Commodity Futures Trading Commission, there is a bullish sentiment emerging in the market. This change is backed by the increase in LNG export capacity and slight upticks in demand forecasts. However, the presence of a substantial oversupply in storage could temper price gains. Over the short term, the market could see volatility with a cautiously bullish outlook, influenced by both domestic production adjustments and international demand for U.S. LNG exports.

Technical Analysis

Natural gas futures are lower on Tuesday, but the move isn’t significant enough at this time to indicate an impending change in trend.

The strong close on Monday has put the market in a position to challenge the $2.531 top from March 5. Meanwhile, natural gas is well supported by the 50-day moving average at $2.172.

The shift from short to long by traders is important because any rally will now be driven by fresh buyers rather than short-covering. This is a bullish development. Trend traders will now have to decide whether to play for a pullback into suppor or chase it higher.