Natural Gas News: Futures lower as Traders Assess Weather and Production

Lower after Earlier Strength

U.S. natural gas futures are down after relinquishing earlier gains as traders evaluated current weather demand, signs of weakening production, and anticipated increases in LNG activity. Monday saw a sharp rally in natural gas prices driven by hot temperatures in Texas/ERCOT, where highs reached the 90s and 100s. Although a slight cooling is expected this weekend, temperatures will remain relatively warm.

At 13:16 GMT, Natural Gas futures are trading $2.722, down $0.034 or -1.23%.

Weather Impact on Demand

According to NatGasWeather, the June 4-10 forecast indicates that most of the U.S. will experience near to warmer-than-normal temperatures through Thursday, with highs in the upper 70s and 80s in the Midwest and Northeast, and upper 80s and 90s elsewhere, except for the Northwest, which will see cooler, showery conditions in the mid-50s to 60s. A hot upper ridge is expected to build over the western half of the U.S. later in the week, while weather systems will cool the eastern half into the 60s-80s, leading to strong demand through Thursday before it lightens.

Production Declines

July NYMEX futures saw a 16.9-cent rally on Monday but retreated from intraday highs on Tuesday. Total domestic production showed a 2.4 Bcf/d day-over-day decline, according to the latest estimates from Wood Mackenzie. This included a 705 MMcf/d upward revision to Monday’s sample.

European Gas Supply Risks and Impact on U.S. Prices

In Europe, supply risks eased as a key Norwegian pipeline is expected to be repaired by Friday, following an outage that caused prices to surge. Europe’s benchmark gas price, the Dutch front-month contract, fell 4% to 34.93 euros/MWh after the news. The outage had driven prices up to 38.56 euros on Monday, the highest since December, due to concerns over tightened supply amidst ongoing issues with Russian gas volumes and increased competition for LNG due to an Asian heatwave.

Norway’s Role in European Gas Supply

Norway, which became Europe’s largest gas supplier in 2022, provided 26% of all natural gas consumed in Britain and the EU. Any outages in Norwegian fields significantly impact prices. Norwegian gas supply nominations rose marginally to 264 million cubic meters per day on Tuesday but remained below the usual 300 mcm/day.

Market Forecast: Bullish Outlook

Given the forecast of strong near-term demand due to continued warm weather, combined with production declines and potential supply disruptions in Europe increasing demand for U.S. LNG exports, the outlook for U.S. natural gas prices remains bullish. Traders should anticipate upward pressure on prices in the short term.

Technical Analysis

U.S. natural gas futures are lower after giving back earlier gains.

The short-term range is $2.144 to $3.159. Its midpoint at $2.652 is potential support. The market is currently trading on the strong side of this pivot, giving it an early upside bias. This 50% level is likely to control the direction of the natural gas market into the close.

On the upside, the nearest target is the 200-day moving average at $2.962. On the downside, the major support is the 50% level at $2.484.

Based on the current price at $2.722, the moving averages indicate the long-term trend is down, but the intermediate trend is up.