Natural Gas Tests $3 as EIA Storage Pressure Eases

Natural Gas Technical Analysis

The natural gas markets have bounced a bit after an initial drop this morning on Friday, as we continue to teeter back and forth just below the $3 level. The $3 level is a large, round, psychologically significant figure that has acted as a ceiling.

But recently, we’ve seen storage become a little less bearish in the United States, as the latest EIA report was only a 30 billion cubic feet injection, broadly in line with expectations, but relatively small considering what we’ve seen recently. The supply versus 5-year average has narrowed to about 160 billion cubic feet, so this is roughly 50 billion cubic feet below last year.

LNG Export Demand and Seasonal Shifts

We are starting to see a little bit more LNG export demand. So, with that, it’s probably going to have more of an effect as time goes on. That does make sense. The export market in the United States has been boosted by the fact that we have more capacity here now to sell to Asians and Europeans, and this is rapidly becoming a place that is expanding its industrial capacity to supply the world.

With that, it will cause a little bit of noise in this market, but we still have plenty of gas here in America, and the time of year, although it’s been hot recently, does get pretty mild. The October contract’s what we’re trading now. Once we get to the end of October, you start to think about cooler temperatures, so we’re definitely in an environment where we could be on our way here.

But I still think this is more neutral than bullish, at least at the moment. I am willing to get more bullish here in a few weeks, though. Ultimately, we are looking at that $3 technical level and watching it cause a little bit of a ceiling in the market.

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