Natural Gas News: Futures Surge on Hot Weather Forecasts

Natural Gas Futures Surge Ahead of Storage Report

Natural gas futures are trading sharply higher ahead of the U.S. government’s weekly storage report, set for release at 14:30 GMT. The report is expected to show a build of 89 Bcf, slightly up from the previous week’s 84 Bcf build.

At 13:06 GMT, Natural Gas futures are trading $2.861, up $0.104 or +3.77%.

Weather-Driven Demand Boosts Prices

Today’s rally is largely driven by forecasts predicting strong weather-related demand. Much of the U.S. will experience warmer-than-normal temperatures through Thursday, with highs in the upper 70s and 80s in the Midwest and Northeast, and upper 80s and 90s across most of the country.

Particularly hot conditions are expected in California and Texas, with temperatures reaching the mid-100s. Later in the week, a hot upper ridge will develop over the western U.S., pushing highs into the 80s-100s, while weather systems will cool the eastern U.S. to the 60s-80s. This forecast indicates strong demand through Thursday, followed by a decrease, according to NatGasWeather.

Market Reactions to Weather and Supply Issues

On Wednesday, natural gas futures spiked as late-June forecasts indicated hotter temperatures, causing bulls and bears to vie for market control for the fourth consecutive session. Analysts anticipate that severe summer heat in the western states will drive substantial gas demand for the first half of June. Although cooler forecasts are expected in the East, the hotter conditions in the West are balancing the market. Additionally, last week’s significant wave of selling is compelling traders to repurchase positions.

Impact of European Gas Outages

An unplanned outage at Norway’s Nyhamna gas processing plant earlier this week caused European natural gas prices to soar to year-to-date highs. This disruption is also supporting the U.S. natural gas market, as it suggests that LNG exports could increase to maximum capacity if pipeline issues persist.

Surge in U.S. LNG Exports

U.S. LNG exports rebounded in May, with Freeport LNG, the country’s second-largest LNG exporter, returning to full production. More supplies flowed to Asia, contributing to the surge. According to data from LSEG reported by Reuters, U.S. LNG exports rose to 7.6 million metric tons in May, up from 6.19 million tons in April and just below the 7.61 million tons exported in March.

Market Forecast: Bullish Outlook

Considering the strong weather-driven demand, possibly lingering supply issues in Europe, and increased LNG exports, the short-term outlook for natural gas futures appears bullish. Traders should monitor weather forecasts and storage report outcomes for further market direction.

Technical Analysis

Natural gas futures are edging higher on Thursday, putting the market in a position to challenge the 200-day moving average at $2.954. Trader reaction to a test of this level will determime the longer-term trend.

On the downside, support is the 50% level at $2.652.