Natural Gas Prices Forecast: Bearish Turn Amid Resolved Strike, Weather, Lower LNG Demand

Highlights

• U.S. natural gas futures rise subtly despite Chevron-Offshore Alliance dispute resolution.
• Strikes at Chevron’s LNG projects could have endangered 7% of global LNG supplies.
• Europe and Asia’s gas price surge may see correction with the dispute’s end.
• Market outlook leans bearish as increased supply could dampen prices in the short term.

Overview

The natural gas market has been experiencing fluctuations, with U.S. natural gas futures demonstrating a subtle rise early Friday amidst resolved disputes between Chevron and the Australian Offshore Alliance. The resolution ends strikes that once threatened to disrupt a significant portion of global LNG supplies, potentially intensifying supply levels in the market.

Resolution of Disputes: A Potential Oversupply?

The cessation of strikes at Chevron’s LNG projects by the Offshore Alliance in Australia may lead to bearish conditions in the natural gas market. These strikes, centering around pay and working conditions, had endangered approximately 7% of global LNG supplies, creating a sense of scarcity. With disputes now settled, the previous threat to global LNG supplies is mitigated, potentially leading to an influx of supply in the market, thereby exerting downward pressure on prices.

Impact on U.S. Natural Gas Futures

U.S. natural gas futures are experiencing modest gains on Friday, but the overall response seemed muted, reflecting perhaps an anticipation of increased supplies affecting prices adversely. This restrained response came despite a 5% decrease in futures on Thursday, influenced by forecasts of milder weather and a decline in gas flowing to LNG export plants.

Supply and Demand Dynamics

The heightened gas prices in Europe and Asia, triggered by concerns over the Chevron strikes and potential supply reductions, may experience a correction with the resolution of the disputes. The increased availability of LNG could balance the previously tight supply-demand equilibrium, and may bring prices to more stable levels. However, this stabilization is contingent on various factors including weather conditions, which influence gas demand significantly, and ongoing maintenance at several U.S. LNG export plants.

Market Outlook: Bearish Sentiments Prevail

In light of the recent developments, a bearish market sentiment seems more plausible in the short term. The resolution of disputes means the market may brace for increased supply levels, potentially lowering prices. However, it remains crucial for market participants to stay attuned to evolving market conditions, supply-demand dynamics, and other geopolitical factors that could sway market sentiments in this intricate natural gas landscape.

Technical Analysis

The current 4-hour price of natural gas stands at 2.619, a slight decline from the previous 4-hour price of 2.650. Comparatively, it’s now trading below both the 200-4H moving average (2.671) and the 50-4H moving average (2.710). This suggests a short-term bearish momentum in the market.

The 14-4H RSI reading of 36.79 indicates a weakened momentum and approaches the oversold threshold, though it hasn’t crossed it yet.

Furthermore, the current price is nestled above the main support area, ranging from 2.542 to 2.487, but remains below the main resistance zone that spans from 2.803 to 2.865. Considering these factors, the market sentiment for Natural Gas, based on the 4-hour chart, appears to be bearish in the short term.