Natural Gas News: Resilient Performance Amid Bearish Factors

Flat Trade to Open New Week

Natural gas futures are exhibiting minimal movement on Monday, indicating uncertainty amidst consolidation just above a significant long-term low. This price action reflects a blend of short-term weather demand outlook and a longer-term anticipation of production cuts leading to reduced stockpiles.

At 12:48, Natural Gas Futures are trading $1.790, up $0.005 or +0.28%.

Last Week’s Performance

Despite a myriad of bearish factors, the U.S. natural gas market showed resilience last week, with futures posting a modest uptick. The primary driver was the expectation of sustained low output in the coming weeks, attributed to ongoing declines in gas rig counts. Settlement for US Natural Gas futures stood at $1.785, marking a 1.25% increase. Notably, there was a significant decline in natural gas production, with average output in the Lower 48 states dropping to 99.1 billion cubic feet per day (bcfd) in April. The reduction is linked to fewer active gas rigs, particularly in the Haynesville shale region. Maintenance activities on key pipelines further contributed to pricing anomalies.

Demand Factors

Weather forecasts indicate a shift towards warmer conditions, potentially reducing heating-related gas consumption. Power outages in the Northeast and the anticipated impact of a solar eclipse on solar generation could also temporarily dampen demand. LSEG projects a decline in gas demand over the next few weeks, reflecting these factors.

Market Influences

Trends in the oil market, including a surge in U.S. oil futures and divergence in LNG and oil trading outcomes by Shell, have indirect effects on natural gas prices. Moreover, global energy dynamics, such as unchanged Asian LNG spot prices and forecasts of an active Atlantic hurricane season, contribute to market volatility.

Short-Term Forecast: Bearish Outlook

Considering the warmer weather outlook, adequate supply amidst reduced production, and broader energy market trends, the short-term forecast for U.S. natural gas prices leans bearish. Traders should closely monitor emerging trends for potential market shifts in the coming weeks.

Technical Analysis

Natural gas futures continue to consolidate near multi-year lows on Monday.

The short-term range is $1.686 to $1.906, making its pivot at $1.796 a key level to watch today for direction.

A trade through $1.906 will change the short-term trend to up. If this creates enough upside momentum, we could see a surge into the 50-day moving average at $1.990. Look for selllers to re-emerge on a test of this trend indicator.

We could see lower prices on a move through $1.686, but it is dangerous to short weakness at current price levels.