Natural Gas News: Holding Steady Following Previous Steep Decline

Natural Gas Futures Hold Steady

US Natural Gas futures are holding steady on Friday following a steep sell-off the previous session. Although the trend is down, some traders believe the market is consolidating and forming a support base for a rally later in the year. However, short-term gains continue to be capped by persistent low demand and high storage numbers.

At 12:22 GMT, Natural Gas futures are trading $1.769, down $0.005 or -0.28%.

Spring Storm Impact

A spring storm is poised to affect the Great Lakes and East regions through the weekend, bringing rain and snow with temperatures ranging from lows in the 20s-30s to highs in the 40s-50s. This weather pattern is expected to spur strong demand. Meanwhile, the rest of the United States will experience mild to pleasant conditions with temperatures ranging from the 50s to 80s. However, as we move into next week, much of the U.S. is forecasted to warm up significantly, resulting in very light demand across the board.

Thursday’s Recap

The U.S. Energy Information Administration (EIA) released its report on Thursday, indicating a 37 Bcf withdrawal of natural gas from storage for the week ended March 29. Although this figure fell slightly short of expectations, it’s worth noting that inventories remain high, hovering around 39% above the five-year average. This surplus exerts downward pressure on Nymex natural gas futures, especially as injection season looms on the horizon.

Bearish Sentiment Looms

Natural gas futures took a hit following the EIA report, closing down 3.6% at $1.774/mmBtu for May delivery. Analysts warn that natural gas is likely to face challenges in the coming weeks due to the persistently large storage surplus. Mizuho’s Robert Yawger emphasizes that this surplus is unlikely to dissipate during injection season. Furthermore, the potential for increased crude oil prices could incentivize producers to ramp up output, leading to further downward pressure on natural gas prices. The situation appears unlikely to reverse course until new LNG projects come online, expected in 2024.

Market Forecast

In the near term, natural gas futures may encounter volatility as traders grapple with conflicting factors. While the current spring storm drives demand in certain regions, the overall picture remains bearish due to the lingering storage surplus. Therefore, we anticipate continued uncertainty in the natural gas market, with prices likely to face downward pressure in the short term.

In conclusion, while there are indications of potential bullishness in the long term, the prevailing bearish sentiment and market conditions suggest a cautious approach for traders in the immediate future.

The short-term trend is down. A trade through $1.906 will change the short-term trend to up. A move through $1.686 will signal a resumption of the down trend.

The short-term range is $1.686 to $1.906, making its 50% level at $1.796 a key pivot controlling the near-term direction of the market.

Given any surprise shifts in the fundamentals, the tone of the market on Friday is likely to be determined by trader reaction to $1.796.