Natural Gas News: Texas Heat Wave Spurs Sharp Turn in Prices

Market Overview

U.S. natural gas futures saw a sharp increase on Monday, buoyed by a shift to an upward trend as indicated by intermediate and short-term trend indicators. The market’s momentum has turned positive with futures trading higher after breaking significant trend lines.

At 13:31 GMT, Natural Gas Futures are trading $2.214, up $0.072 or +3.36%.

Weather and Demand Factors

According to NatGasWeather, current forecasts predict hot temperatures across Texas and the South, which are expected to drive demand between Tuesday and Thursday. However, a bearish outlook persists for areas east of the Rockies over the next 5 to 15 days. These mixed weather conditions influence both spot prices and futures, reflecting a volatile demand environment. Over the weekend, Texas’ high temperatures, alongside reports of increased feedgas usage by Freeport LNG exceeding 1 billion cubic feet (Bcf), contributed to the price rise.

Storage and Production Trends

The Energy Information Administration (EIA) reported a significant build in natural gas storage last week, adding 59 Bcf and exceeding analyst expectations. This increase has elevated storage levels above last year’s and the five-year average, suggesting a potential supply overhang. Concurrently, a reduction in active drilling rigs points to a future decrease in production, adding complexity to supply forecasts.

LNG Exports and Market Implications

Shifts in the LNG export arena are also impacting U.S. natural gas markets. The upcoming launch of the LNG Canada project, which is set to process significant daily volumes, might reduce U.S. gas exports to Canada, potentially reshaping North American gas trade.

Short-Term Forecast

The long-term market outlook remains bearish, influenced by high inventory levels despite rising temperatures in certain regions. The market’s direction in the coming weeks will likely depend on sustained hot weather and increased LNG demand. Without these, the current price gains may not be sustainable, potentially offering new opportunities for short sellers. Traders should monitor weather developments closely and adjust strategies accordingly to manage this period of market adjustment and potential volatility.

Technical Analysis

Natural gas is edging higher on Monday after changing the short-term trend to up on Friday and crossing to the strong side of the 50-day moving average earlier today.

The key to sustaining the rally will be establishing support on the bullish side of the 50-day MA. This indicator is controlling the intermediate-term trend.

On the upside, taking out the April 10 main top at $2.291 will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the March 5 main top at $2.531 the next target.