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

By:
James Hyerczyk
Published: Apr 15, 2024, 12:42 GMT+00:00

Key Points:

  • Last week's EIA storage build continues to weigh.
  • U.S. Natural Gas Inventories 39% Above Five-Year Average.
  • Short-Term Outlook Cautiously Bearish as traders focus on production, demand trends.
Natural Gas News

In this article:

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%.

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.

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

Daily Natural Gas

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.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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