Natural Gas News: Traders Seek Support Base Amidst High Storage Levels

U.S. Natural Gas Market Analysis

U.S. natural gas futures are slightly down as traders seek to establish a support base. Despite an attempted breakout above the 50-day moving average last week, factors such as favorable weather, low LNG demand, and significant storage builds have stalled upward trends.

At 12:27 GMT, Natural Gas Futures are trading $1.735, down $0.035 or -1.98%.

Market Trends and Influences

The market reacted sharply to last Thursday’s EIA report, which recorded a storage build exceeding expectations by more than 10 Bcf, causing a drop in prices. The weather forecast predicts mild conditions with temperatures ranging from 50s to 80s Fahrenheit across the U.S., suggesting continued light demand for the next week.

Storage and Production Trends

End-of-season reports show U.S. natural gas inventories 39% above the five-year average, with a surplus driven by a mild winter and reduced residential and commercial consumption. This surplus has pressured prices, with Henry Hub averaging less than $2.00 per MMBtu recently. Projected natural gas production for the upcoming months shows a slight decline from the previous year.

Global LNG Exports

Globally, U.S. LNG exports are expected to rise modestly in 2024, with significant project completions poised to boost supply by year-end. Meanwhile, Asian LNG prices have climbed, supported by steady demand and supply disruptions, potentially redirecting U.S. LNG from Europe to Asia due to favorable price arbitrage.

Short-Term Market Forecast

The market’s short-term outlook remains cautiously bearish due to high storage levels and anticipated mild demand. However, potential reductions in production or increased demand for electricity generation during a hotter summer could tighten the market and support a price rebound. Traders should closely monitor updates on production and consumption trends, which will be key in shaping the market’s near-term direction.

Technical Analysis

U.S. natural gas futures are under pressure on Monday, while hovering just above a multi-year low. Meanwhile, the 50-day moving average continues to trend lower.

This intermediate trend indicator at $1.936 is controlling the near-term direction of the market. A sustained move under this indicator is expected to keep the pressure on prices. However, some also view it as a potential trigger point for an upside breakout.