Natural Gas Prices Forecast: Aussie Strikes, EIA Report Spur Gas Price Surge

Highlights

• Chevron, Australian unions fail to strike a deal.
• EIA storage data below expectations due to Texas heatwave.
• ERCOT highlights Texas’s escalating power demand.

Australian LNG Plants to Strike

US natural gas futures rose significantly, driven not only by domestic concerns but also due to potential strikes at Australian LNG plants. Negotiations between Chevron and Australian workers’ unions culminated without an agreement, confirming the strike will proceed.

EIA Report Highlights Surprising Data

The US Energy Information Administration (EIA) recently reported that last week’s storage buildup of natural gas was less than anticipated. This was mainly because power generators utilized more gas during the persisting heatwave, primarily in Texas. Consequently, utilities in the South Central region, which includes Texas, drew gas from storage for a seventh consecutive week. This marked the longest such streak during summer since 2017. The reduced storage injections nationwide are attributed to these withdrawals. Interestingly, the EIA disclosed that utilities stored only 33 billion cubic feet (bcf) of gas in the week concluding on Sept. 1, considerably below analysts’ predictions.

Texas Faces High Demand

The Electric Reliability Council of Texas (ERCOT) emphasized the state’s heightened electricity demand amidst ongoing high temperatures. Encouraging residents to conserve energy, the council anticipates setting new peak demand records throughout September. The extensive heat implies utilities have to utilize more gas for power, primarily in Texas where almost half of the state’s electricity is gas-generated.

Supply and Demand Dynamics

Financial data indicates a minor dip in average gas output in the US, with current daily figures likely to fall to an 11-week low. Although meteorologists predict higher-than-average temperatures until late September, with the approaching seasonal cooling, there’s an expectation of reduced gas demand. Gas flows to prominent US LNG export facilities saw an uptick in September compared to August, yet it’s still below the record set in April.

Short-term Forecast: Bullish Outlook

The natural gas prices closed with a notable 2.7% rise at $2.579/mmBtu, ending consistent declines over the last four sessions. The bullish trend was propelled by the recent EIA storage report, which surpassed analyst expectations, underscoring the heightened reliance on gas, especially during climatic extremes. Given the current data and market responses, a bullish trend is anticipated in the short term.

Technical Analysis

The current 4-hour price for natural gas is 2.635, positioned below both the 200-4H moving average (2.649) and the 50-4H moving average (2.658), signaling a bearish undertone. The 14-4H RSI at 59.29 suggests slightly strengthened momentum, but not into the overbought range.

Currently, the price sits just below the main resistance zone of 2.636 to 2.674. Without clear minor resistance levels and its nearness to the primary resistance area, there’s potential for volatility.

Overall, despite the recent momentum indicated by the RSI, the prevailing market sentiment for natural gas leans bearish due to its position relative to the moving averages, but there is the potential for a counter-trend breakout to the upside if buyers can overcome both the moving averages and the resistance zone.