Natural Gas Prices Forecast: Weather, Exports, Potential Strike Influences

Highlights

• U.S. natural gas futures rally potentially driven by short-covering.
• European and Asian gas markets influence U.S. LNG exports.
• External factors may spur or stabilize near-term prices.

Overview

U.S. natural gas futures saw an uptick on Tuesday but recoiled from pre-market session highs. This behavior indicates the rally might have been driven by short-covering or mere speculative buying.

Demand and Supply Dynamics

While some attribute the spike to a surge in demand due to hot weather, it’s worth noting that market dynamics are forward-looking, often pricing in conditions expected over the next 10-15 days. Such conditions have already been integrated into the current market prices.

Factors like the potential strike at LNG facilities in Australia, which left European and Asian buyers scurrying, played a part in the previous week’s price surge.

Furthermore, as we near September, seasonal buying for the winter could begin to rise. In Texas, where a major chunk of electricity is derived from gas-fired plants, a surge in consumption is anticipated as wind generation decreases. Last week, Texas saw an unprecedented surge in power demand, and this trend is likely to continue.

European and Asian Market Impact

The interplay between U.S. and European gas markets isn’t directly aligned, as highlighted by Goldman Sachs. While the U.S. Henry Hub has its dynamics, the European TTF markets follow a different trajectory.

For the U.S. to maintain its LNG exports, global gas prices need to remain buoyant. Interestingly, in 2022, a significant portion of U.S. LNG exports found its way to Europe, diverting from Asia due to favorable prices. However, with Asia experiencing a resurgence in gas prices, the U.S. might divert more exports there, as demonstrated by the trends of 2023.

Short-Term Forecast

In the upcoming days, if factors like extended hot weather forecasts, Australian LNG complications, or a rise in seasonal winter buying converge, a notable rally could be on the horizon. Conversely, absent these, prices might stabilize in the near term. Additionally, with shale gas output expected to decline in the prominent basins, coupled with a decrease in gas flows to major U.S. LNG export plants, there’s potential for bullish developments in the gas market.

Technical Analysis

With the current 4-hour price of Natural Gas at 2.802, it’s trading above both the 200-4H moving average of 2.674 and the 50-4H moving average of 2.745, indicating bullish momentum both in the short and longer terms. The 14-4H RSI is at 51.17, slightly above the neutral mark, further supporting a mild bullish sentiment.

While the price remains comfortably above the main support area between 2.542 to 2.487, it has yet to approach the main resistance zone from 3.027 to 3.091. Overall, the Natural Gas market appears to be bullish in the 4-hour timeframe, with room for upward movement before encountering significant resistance.