Natural Gas Prices Forecast: Futures Respond to Weather Shifts, Australian Labor Disputes

Highlights

• U.S. natural gas futures see a subtle rise amid this week’s notable downtrend.
• Workers’ strikes threaten two major Australian LNG plants, rattling global markets.
• U.S. gas futures’ gains capped by predictions of cooler weather and reduced demand.

Strike Risks at Australian LNG Plants

U.S. natural gas futures witnessed a minor uptick on Wednesday, following an earlier potential continuation of this week’s substantial losses. Central to this volatility is a looming workers’ strike at two major Australian LNG facilities, namely Chevron’s Gorgon and Wheatstone, over unresolved pay and condition disputes. The anticipation of strike action has caused ripples in the global gas market, as traders weigh the long-term disruption risks. Despite the tremors, Dutch and British gas prices displayed resilience, with factors such as high inventory levels and tepid demand overshadowing potential supply challenges.

Australia’s Stance as Global LNG Leader

Australia enjoys the distinction of being the world’s foremost LNG exporter. An extended disruption, therefore, can have sizable implications. Facilities like Chevron’s Gorgon, the country’s second-largest LNG plant, along with Wheatstone, jointly contribute to over 5% of the global LNG capacity. This, coupled with Australia’s ongoing pay and work condition disputes, means potential supply chain hiccups can reverberate through the global market.

Weather Dynamics and Natural Gas Demand

Recent data from NatGasWeather highlights an imminent shift in the weather pattern across the U.S. The coming days are projected to witness robust national demand due to hotter temperatures. However, the data also points towards a potential cool-down by mid-September. This cooler trajectory can lead to diminished national demand, impacting gas prices in the process. Indeed, U.S. natural gas futures recently plunged by 7% as forecasts predicted milder weather and a subsequent dip in gas demand.

Texas: Power and Gas Dynamics

The Electric Reliability Council of Texas (ERCOT) has issued a Weather Watch, anticipating higher temperatures and increased electrical demand. Extreme temperatures, especially in Texas, ramp up gas consumption, as the state majorly relies on gas-powered plants for electricity. Approximately 49% of Texas’ electricity in 2022 was sourced from gas-fired plants, underscoring the significance of weather dynamics on the state’s gas demand.

Short-Term Forecast

Given the imminent strikes in Australia, alongside shifting weather patterns in the U.S., the gas market is poised for volatility. Speculators and traders should be prepared for a mix of bullish and bearish trends, influenced largely by supply chain disruptions and evolving demand due to meteorological factors.

Technical Analysis

The Natural Gas market exhibits bearish sentiment based on the 4-hour chart data. The current 4-hour price of 2.602 is below both the 200-4H moving average of 2.659 and the 50-4H moving average of 2.668, signaling a bearish trend. The 14-4H RSI reading stands at 40.16, below the neutral level of 50, which suggests weakened momentum.

Furthermore, the current price is hovering above the main support area of 2.542 to 2.487 but is below the main resistance area of 2.636 to 2.674. Although it’s still above main support, its position below both moving averages and a sub-50 RSI point towards bearish market conditions.