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Natural Gas Prices Forecast: Heightened Volatility Expected Amid Dual EIA Report

By:
James Hyerczyk

Ahead of EIA reports and despite high production, colder weather spurs a significant uptick in U.S. natural gas futures.

Natural Gas Prices Forecast

In this article:

Highlights

  • Two EIA reports stir natural gas market volatility.
  • Weather forecasts impact U.S. natural gas demand.
  • Gas futures rise amid production changes and export trends.

U.S. Natural Gas Futures Respond to EIA Reports and Weather Forecasts

U.S. natural gas futures are experiencing an uptick ahead of two pivotal U.S. Energy Information Administration (EIA) weekly storage reports, due to be released at 15:30 GMT and 16:00 GMT, respectively. Market analysts anticipate volatile trading, with the release of two simultaneous EIA reports, a rarity in market trends.

EIA Reports Predict Varied Storage Dynamics

The first of the two EIA reports, delayed from last week, is expected to show a draw of -6 to -7 billion cubic feet (Bcf), significantly below the 5-year average of +36 Bcf. This forecast reflects the impact of colder temperatures. Conversely, the regular report for this week projects a substantial build, ranging from +32 to +44 Bcf, most notably at +40-44 Bcf, against a 5-year average of +20 Bcf.

Weather Conditions Influence Gas Demand

NatGasWeather forecasts for November 16-22 predict warmer-than-normal conditions in most of the U.S., with a subsequent shift to cooler temperatures in the Midwest and Northeast. This shift is expected to increase seasonal demand for natural gas, albeit not robustly, due to continued warmer conditions in other parts of the country.

U.S. natural gas futures surged by about 3% on Wednesday, driven by colder weather forecasts and heightened heating demand. This increase in demand comes despite record-high gas production, which is expected to enable continuous gas storage injections until late November.

Supply, Demand, and Export Dynamics

Current gas production in the Lower 48 U.S. states has risen, but a recent drop in output is noted. Meteorological projections suggest warmer weather until late November, followed by a colder trend. Gas demand, including exports, is expected to rise next week.

Pipeline exports to Mexico have declined, but U.S. LNG exports remain strong, with an increase observed in gas flows to major LNG export plants.

The natural gas market is thus balancing between supply dynamics, export demand, and weather-driven domestic consumption trends.

Technical Analysis

Daily Natural Gas

The current daily price of natural gas at 3.220 is trading above its 200-day moving average of 2.603, indicating a longer-term upward trend. It is also positioned above the 50-day moving average of 3.040, further reinforcing this bullish trend.

The price sits between the minor support at 3.184 and the minor resistance at 3.434. This positioning suggests that natural gas is in a relatively strong zone, with potential for further gains if it breaks through the minor resistance level.

However, if the price falls below the minor support, it could signal a shift towards a bearish sentiment.

Overall, the market sentiment for natural gas currently leans bullish, given its position relative to key moving averages and support-resistance levels.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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