Natural Gas Prices Forecast: Cooler Outlooks Weigh as Traders Await EIA Report

Highlights

• Natural gas futures rise on storage report anticipation and position-squaring.
• Cooling forecasts trigger drop in gas futures, impacting demand outlook.
• U.S. gas demand forecast increases; supply disruptions and European prices monitored.

Overview

US natural gas futures are moving higher on Thursday, driven by short-covering and position-squaring ahead of the U.S. government’s weekly storage report, due to be released at 14:30 GMT.

EIA Expected to Report 35 Bcf Weekly Storage Build

Traders are preparing for the U.S. Energy Information Administration (EIA) figures, having priced in a 35 Bcf build for the week ending on August 11. The most recent data indicates that working gas in storage reached 3,030 Bcf as of August 4, marking a 29 Bcf increase from the prior week. This exceeded expectations of a 25 Bcf build. Current stocks sit at 535 Bcf higher than last year and 305 Bcf above the five-year average, placing total working gas within the five-year historical range.

Natural Gas Futures Drop Amid Cooling Weather Predictions

The market experienced a more than 2% drop in U.S. natural gas futures, reaching a one-week low on Wednesday due to cooling weather forecasts, particularly in the northeastern U.S. Cooler temperatures in key regions are projected, which is anticipated to dampen natural gas demand for cooling purposes. Despite the hotter-than-normal weather persisting in the lower 48 states until at least the end of August, the upcoming period is expected to be milder than recently, particularly in the populous Northeast region. This shift in expectations curbs late-season power sector demand for cooling.

U.S. Gas Demand Forecasts Upbeat Despite Fluctuations

Refinitiv, a data provider, foresees an increase in U.S. gas demand, including exports, rising from 104.9 bcfd this week to 106.6 bcfd in the next week, suggesting a positive trajectory. Despite fluctuating demand, average gas output in the Lower 48 states has maintained consistency, hovering around 101.8 bcfd in August. This level closely mirrors July’s reading and remains close to the record of 102.2 bcfd in May.

Global Factors Shape Natural Gas Market Dynamics

While gas flows to major U.S. LNG export plants have experienced minor reductions, market participants are closely watching potential supply disruptions due to labor disputes in Australian LNG facilities. This global perspective adds another layer of complexity to the market dynamics. European gas prices, meanwhile, have seen a decline, impacting the broader energy landscape. Amidst these intricacies, market players continue to assess various factors shaping natural gas trends, ranging from weather patterns to labor negotiations, to navigate the current landscape.

Short-Term Outlook:  Cooling Weather Fuels Bearish Sentiment

The recent cooling weather forecasts and the dip in U.S. natural gas futures suggest a short-term bearish sentiment. The shift towards milder temperatures may curtail demand for cooling, impacting natural gas consumption. However, market dynamics remain subject to various factors, including demand fluctuations and labor negotiations, which could introduce volatility.

Technical Analysis

The current Natural Gas price at 2.593 is slightly higher than the previous 4-hour close of 2.591, reflecting modest positive momentum. The 200-4H moving average at 2.668 acts as a resistance, with the current price trading below it. Similarly, the 50-4H moving average at 2.756 serves as a resistance, further indicating a bearish sentiment. The 14-4H RSI stands at 33.25, signaling oversold conditions, suggesting potential for a price rebound.

Main support lies at 2.542 to 2.487, and resistance resides at 3.027 to 3.091. Considering these factors, the market’s bearish tone prevails, marked by resistance at moving averages and an oversold RSI.

Be prepared for a technical bounce, following the first test of the support zone. However, if it fails as support then look for a potential acceleration to the downside.