Natural Gas Prices Forecast: Lower Production Helps Futures Soar Ahead of EIA Data

Key Points

• Natural gas futures rise, EIA report highly anticipated.
• Cooler weather, output cuts boost gas prices.
• Ample storage suggests limited gains in natural gas.

U.S. Natural Gas Futures Rise Ahead of EIA Report

U.S. natural gas futures are experiencing a sharp increase as traders anticipate the weekly Energy Information Administration (EIA) storage report. The rise is attributed to cooler weather forecasts and ongoing output reductions. However, the ample supply in storage suggests that gains might be capped.

At 13:16 GMT, Natural Gas Futures are trading $2.821, up $0.180 or +6.82%.

EIA Storage Report Expectations

Today’s EIA storage report is expected to show a significant draw, with estimates around -324 to -328 billion cubic feet (Bcf), influenced by colder-than-normal temperatures across most of the U.S. Current storage levels are at 3,182 Bcf, which is above the five-year average and last year’s figures, indicating a robust supply.

Weather Impact on Demand

The NatGasWeather forecast predicts an active weather pattern across the U.S. with varying temperatures. The northern U.S. will experience cooler weather, while the southern regions will be milder. This weather pattern is expected to result in very light national demand over the next seven days.

Recent Market Recap

U.S. natural gas futures surged by about 8% on Wednesday, driven by forecasts for cooler weather and higher heating demand. Despite this, warmer-than-normal weather is expected to persist into early February, potentially reducing gas demand and boosting output.

Supply and Demand Outlook

U.S. gas output in January has decreased compared to December’s record levels. However, a recent uptick in daily output has been observed. Demand, including exports, is forecasted to decrease next week. U.S. pipeline exports to Mexico have increased this month, and LNG feedgas to export plants has shown signs of recovery after recent drops.

Short-Term Market Forecast

The market is cautiously bullish in the short term, with natural gas futures reacting to weather forecasts and storage reports. However, the ample supply and potential for increased output may limit gains. Traders are likely to view the current rally as an opportunity for selling, keeping a close watch on the upcoming EIA report and weather patterns.

Techncial Analysis

U.S. natural gas futures are up sharply on Thursday after crossing to the strong side of the downtrending 50-day moving average at $2.686. However, the rally was halted by a resistance level at $2.874.

Taking out $2.874 could trigger an acceleration into the resistance cluster formed by the resistance at $3.056 and the downtrending 200-day moving average at $3.063.

On the downside, a failure to hold above the 50-day MA will signal the end of the rally and likely lead to a resumption of the downtrend.