Natural Gas News: Downward Pressure Ahead of EIA Storage Report

Overview

As traders eagerly await the upcoming government’s weekly storage report, U.S. natural gas futures are exhibiting a downward trend on Thursday. The report, due at 14:30 GMT, is crucial in shaping today’s market behavior.

At 12:06 GMT, Natural Gas Futures are trading $1.683, $0.016 or -0.94%.

Storage Report Expectations

Central to today’s market movements is the release of the EIA’s weekly storage report. Market analysts are predicting a build of +1 to +5 billion cubic feet (Bcf), considerably below the 5-year average of a -27 Bcf draw. This build, influenced by warmer than usual temperatures across most of the U.S., is expected to increase surpluses to near +665 Bcf, assuming our forecast of a -1 to -2 Bcf draw is accurate.

Recent Weather Trends

The period from March 21-27 will see diverse weather conditions across the U.S. Northern regions are expected to face colder weather with highs ranging from 20s to 50s, accompanied by rain and snow. In contrast, the southern states will experience milder temperatures, with highs from the upper 50s to 80s and scattered showers. These conditions are anticipated to result in moderate natural gas demand over the next week.

Wednesday Market Recap

Natural gas futures dipped by about 3% on Wednesday. This decline was primarily due to forecasts of reduced demand over the forthcoming two weeks and the extended outage at Freeport LNG’s export plant in Texas. Notably, two liquefaction trains at this plant are anticipated to be out of commission until May for testing and repairs.

Supply and Demand Trends

In terms of supply and demand, the U.S. gas market is undergoing notable changes. Domestic gas production has seen a downtrend, with a 5% reduction over the past month. This decrease is partly attributed to major energy firms, like EQT and Chesapeake Energy, scaling back their drilling activities in response to low gas prices and high stockpiles. Despite these challenges, analysts project an increase in U.S. gas consumption to record highs in 2024.

Short-Term Market Forecast

The short-term forecast for U.S. natural gas markets leans towards a bearish outlook. Factors such as the upcoming EIA report, decreased production, and the situation at Freeport LNG are likely to exert downward pressure on prices in the near term.

Technical Analysis

Natural gas futures are lower on Thursday, putting the market within striking distance of last week’s low at $1.643 and the major February bottom at $1.607.

On the upside, the current seven day consolidation pattern suggests a trade through $1.774 could change the minor trend to up. A combination of aggressive short-covering and counter-trend buying could create the upside momentum needed to challenge the downtrending 50-day moving average at $1.969.