Natural Gas Price Prediction – Natural Gas Rallies After EIA Report

Key Insights

• Natural gas rallied to $6.15 after EIA report missed analyst estimates. 
• The report highlighted the strong demand for natural gas. 
• It remains to be seen whether one bullish EIA report will be sufficient enough to break the downside trend. 

Short-Sellers Got Caught After The Release Of The Surprising EIA Data

Natural gas markets rallied after EIA released its Weekly Natural Gas Storage Report. The report indicated that working gas in storage increased by 60 Bcf from the previous week, compared to analyst consensus of 74 Bcf. At current levels, the stocks are 322 Bcf below the five-year average of 2,633 Bcf.

Traders have immediately reacted to the report, and natural gas grew from $5.73 to $6.15. The growth of working gas in storage missed analyst expectations, which means that demand was strong.

This was a major surprise for traders who expected that problems at Freeport LNG will lead to excessive supply in the domestic market.

Natural Gas Was Oversold

The explosion at Freeport LNG and the related increases in natural gas inventories have pushed natural gas from $9.50 to $5.50 in just one month. This was a huge move for natural gas markets, which found themselves close to oversold levels.

It should be noted that most commodity markets have recently suffered a strong sell-off amid recession fears. However, recent data from the U.S. indicated that the economy remained in a good shape. The weather remains favorable for high natural gas demand, which may serve as an additional bullish catalyst for natural gas markets.

That said, it remains to be seen whether the curent upside move will be sustainable. Aggressive short-sellers got caught by a surprising report, but natural gas will clearly need additional upside catalysts to break the downside trend which began in the first half of June.

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