Natural Gas Forecast: Concerns Grow Over European Gas Storage Levels and US LNG Cargoes

Highlights

• US natural gas futures steady despite record-high flows
• Low gas prices could prompt US LNG export cancellations
• European gas stockpiles raise storage containment concerns

Overview

Natural gas is trading lower on Monday but inside the trading ranges of the past two sessions. On Monday’s, this typically indicates there was no change to the forecast over the weekend. And since prices are declining we could start the new week with a slight bias to the downside.

At 10:47 GMT, Natural Gas is trading at $2.189, down $0.044 or -1.97%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $7.01, down $0.01 or -0.21%.

US LNG Exports at Risk

US natural gas futures remained steady on Friday due to minor changes in weather and demand forecasts for the next two weeks, despite record-high flows to US LNG export plants. However, some analysts are concerned that low gas prices in Europe and Asia, coupled with oversupply and weak demand, could force US LNG exporters to cancel cargoes this summer, as was the case in 2020.

European Gas Stockpiles Raise Concerns

European gas stockpiles are currently tracking near 2020 levels, causing concern that prices could follow last year’s path and lead to the closure of LNG exports to prevent a global storage containment issue.

US LNG Cargoes Face Cancellation Risk

While the window for shipping US LNG to Asia and Europe remains open, ClearView Energy Partners warns that a scenario where European storage fills earlier than last year and Asian demand growth fails to materialize could result in the cancellation of US LNG cargoes again.

US Gas Prices Lag Globally

The US lags behind global gas prices because it is the world’s top producer and has enough fuel for domestic use. Capacity constraints and the 2022 Freeport outage prevented the US from exporting more LNG. Refinitiv reported that US gas output increased to 100.2 bcfd in April, with meteorologists predicting colder than normal weather until May 3, followed by a return to normal temperatures from May 4-6. Refinitiv expects US gas demand, including exports, to rise from 95.0 bcfd this week to 96.6 bcfd next week before falling to 93.4 bcfd in two weeks as the weather becomes seasonally milder.

Technical Analysis

From a daily technical viewpoint, Natural Gas is trading on the weak side of its daily pivot at $2.353, but above the nearest support at $1.904. The long-term technicals are bearish, but the short-term outlook indicates a developing upside bias. Trader reaction to the near-term pivot at $2.353 sets the tone.

A sustained move over the pivot at $2.353 will indicate the buying is getting stronger. This could lead to a near-term acceleration to the upside with R1 at $2.727 the nearest target.

However, a sustained move under Pivot at $2.353 will indicate the short-term selling pressure is getting stronger with a retest of the multi-year low at $1.904 the next likely target.

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