Natural Gas Prices Forecast: Plunge on Ample Supply Ahead of EIA Report

Key Points

• Natural gas futures decline due to high supply and mild weather.
• LNG plant outages negatively impact natural gas prices.
• Short-term outlook is bearish amid low demand and technical breakdown.

US Natural Gas Futures Test Three-Year Low

U.S. natural gas futures dipped on Thursday as traders awaited the government’s weekly storage report. With ample fuel in storage, rising output, and reduced gas flow to LNG export plants, futures are at a three-year low, breaching the $2 per mmBtu support level.

At 14:14 GMT, natural gas futures are trading $1.935, down $0.032 or -1.63%.

Technical Analysis Suggests Further Downside

The break below the $2.00 support level implies potential further downside, with the next significant support seen at $1.80. Traders note record output and mild winter weather have led to decreased fuel extraction from storage, leaving stockpiles 10% above normal levels.

Output Rise and LNG Outage Impact Prices

Record output and mild weather have allowed gas wells to return to service post-Arctic blast, while ongoing LNG export plant outages have kept prices oversold. Rising price volatility has led to increased trading interest, with open interest in NYMEX futures reaching levels not seen since February 2020.

Energy Information Administration Weekly Storage Report

Thursday’s EIA report is expected to show a draw of -74-77 Bcf, with warmer-than-normal weather across the U.S. Temperatures are forecast to remain near or above normal through mid-February before sliding to near-normal levels.

Supply and Demand

Gas output in the Lower 48 states rose in February but remained below record highs. Warmer-than-normal temperatures are projected to persist, with increased demand anticipated as colder weather approaches. However, LNG exports have declined, with analysts expecting a return to record levels once plant outages are resolved.

Mild Weather Ahead, Bearish Market Outlook

Mild weather systems will bring rain and snow across the U.S., keeping temperatures near to above normal. With very light national demand expected, the short-term outlook remains bearish for the natural gas market.

Technical Analysis

Natural gas prices are under pressure on Thursday after slipping convincingly below the 50-day moving average at $2.062, which is new resistance.

Crossing below the psychological $2.00 level is another sign of weakness. The selling pressure could actually accelerate to the downside with $1.78 the next target despite some technical measures indicating oversold conditions.