Natural Gas News: Weighing Weather and MVP Impact Ahead of EIA Storage Data

Natural Gas Futures Dip as MVP Nears Operation; EIA Report Awaited

Natural gas futures declined on Thursday as traders focused on potential supply increases from the Mountain Valley Pipeline (MVP) and anticipated the U.S. Energy Information Administration’s (EIA) weekly storage report. Despite a two-day pullback, the market remains buoyed by expectations of record heat through June, creating a possible “buy the dip” scenario.

At 12:22 GMT, Natural Gas futures are trading $2.971, down $0.074 or -2.43%.

EIA Weekly Storage Report

Analysts predict a 75 Bcf increase in natural gas storage, following last week’s reported 98 Bcf rise, bringing total working gas in storage to 2,893 Bcf. This figure stands 373 Bcf higher than the previous year and 581 Bcf above the five-year average. The current storage level exceeds the five-year historical range, indicating robust supply.

Weather Outlook

From June 13-18, a hot ridge will dominate California and the southern U.S., with temperatures in the 90s-100s. The Great Lakes to Northeast will experience moderate weather with highs in the 70s-80s. Most of the U.S. will warm above normal this weekend and next week, except for the cooler Northwest. Overall, demand is expected to be moderate through Thursday, rising to high levels thereafter.

MVP Start-Up Preparations

The Mountain Valley Pipeline, valued at $7.85 billion, is nearing operational status after regulatory approval. Spanning from West Virginia to Virginia, the 2.0 bcfd pipeline has faced several delays since 2018 due to regulatory and legal challenges. Equitrans Midstream, the lead partner, has indicated that final preparations are underway, though an exact start date remains unspecified.

Production Adjustments

EQT, the U.S.’s largest gas producer, has started to resume production curtailed earlier this year. Some of this increased output is expected to flow through the MVP, though analysts from EBW Analytics caution that downstream pipeline constraints may prevent the pipeline from reaching full capacity during the summer.

Market Forecast

With the MVP’s imminent operation and substantial gas storage levels, the near-term outlook for natural gas is bearish. While demand is expected to rise with increasing temperatures, the additional supply from MVP and high storage levels may suppress prices. Traders should monitor storage reports and pipeline developments closely for shifts in supply.

Technical Analysis

Natural gas futures are edging lower for a second session on Thursday, putting it in a position to test the 200-day moving average at $2.944. This long-term trend indicator is controlling the near-term direction of the market.

Since the trend is up, look for a technical bounce on the first test of the 200-day MA. If it holds then it will demonstate that the buying is real and not just buy stops triggered by the breakout of the 200-day MA.

A failure to hold the 200-day MA could lead to a test of a pivot at $2.840.