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Natural Gas News: Lighter Draw Predicted in Today’s EIA Storage Report

By:
James Hyerczyk
Updated: Feb 29, 2024, 14:02 UTC

Key Points:

  • Upcoming EIA report to show a lighter draw than the 5-year average
  • Weather variability influencing natural gas demand
  • Chesapeake Energy to cut gas output in 2024
Natural Gas News

In this article:

U.S. Natural Gas Market Overview

U.S. Natural Gas futures are showing a downward trend as traders anticipate the latest U.S. Energy Information Administration (EIA) storage report. Expected to show a lighter draw than the 5-year average, the market reflects a mix of weather patterns and energy production trends.

EIA Storage Report Expectations

Today’s EIA report is predicted to reveal a draw of approximately -83 to -90 billion cubic feet (Bcf), significantly below the 5-year average of -143 Bcf. This reduced draw is partly due to warmer than usual temperatures across the U.S. and the increased contribution of renewable energy sources like wind and solar.

Weather Impact on Demand

The current weather forecast indicates a mix of conditions across the U.S. While the West experiences cooler temperatures with rain and snow, leading to moderate demand, much of the country will see above-normal temperatures, resulting in very light demand. This fluctuating weather pattern contributes to the market’s current state.

After hitting a four-year low, U.S. natural gas prices saw a 3% rise on Wednesday. This recovery is attributed to a spike in European demand and warmer temperatures in the southern U.S., which increased cooling demand. Despite this, natural gas prices have decreased by over 30% since the start of the year.

Global LNG Market and Production Levels

While European gas demand may weaken, global demand for liquefied natural gas (LNG) is expected to grow, driven by Chinese and European markets. However, U.S. natural gas output, although increasing in February, remains below December’s record levels. Chesapeake Energy’s recent decision to cut gas output this year by 30% also influences the market.

Short-Term Market Forecast

Considering the mixed weather conditions, varied demand levels, and the current state of LNG markets, the short-term fundamental outlook for U.S. natural gas prices appears bearish. The market is likely to experience continued volatility, with lower demand and increased stockpiles exerting downward pressure on prices. Technically, the chart pattern looks a little more optimistic as traders attempt to build a support base.

Technical Analysis

Daily Natural Gas

The nearby natural gas futures chart pattern suggests consolidation may be taking place. If yesterday’s upside momentum can resume then buyers are likely to take a shot at the downtrending 50-day moving average at $2.081. Since the longer-term trend is extremely week, sellers are likely to show up on a test of the 50-day MA.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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