Natural Gas Forecast: Futures Slide Amid Forecasts Calling for Reduced Demand

Highlights

• U.S. natural gas futures down due to reduced demand forecast.
• Texas experiences all-time high power demand amidst heat wave.
• Natural gas market under pressure from demand and supply dynamics.

Overview

U.S. natural gas futures encountered downward pressure on Wednesday, following a recent 3% drop driven by forecasts for reduced demand over the next two weeks. The price decline came despite preliminary drops in daily output and predictions of hotter-than-normal weather continuing through mid-August, especially in Texas.

Texas Power Demand Hits Record

As temperatures soared, power demand in Texas reached an all-time high, with the Electric Reliability Council of Texas (ERCOT) projecting further record-breaking highs in the coming days. The lingering heat wave pushed homes and businesses to keep their air conditioners running at full capacity, leading to increased consumption of gas-fired power plants. Texas, heavily reliant on natural gas for electricity generation, experienced a surge in gas consumption for cooling needs.

EIA Reports Near Record

The Energy Information Administration (EIA) reported a notable increase in U.S. power consumption, just shy of the all-time high record set in 2022. Additionally, Refinitiv’s data revealed that temperatures in the U.S. Lower 48 states approached the record level set on July 20, 2022.

Demand Close to Seasonal Levels

The supply and demand outlook remains critical for the natural gas market. While Refinitiv data showed a slight increase in average gas output in the Lower 48 states for July, daily output was expected to experience a significant decline, reaching a preliminary two-week low. It’s worth noting that preliminary data is often subject to revisions throughout the day.

Meteorologists predict that the heat wave will persist in most parts of the Lower 48 states until at least August 16. Although temperatures are expected to remain high in the southern half of the U.S., overall demand is anticipated to be near seasonal levels during certain periods.

Refinitiv forecasts a slight increase in U.S. gas demand, including exports, as power generators respond to the rising air conditioning demand driven by the scorching weather. However, the market faces challenges, as the hot weather continues to impact demand and supply dynamics.

LNG Exports Improve

Gas flows to major U.S. liquefied natural gas (LNG) export plants have shown improvement compared to June, but they have not yet reached the record levels seen in April due to ongoing maintenance at certain facilities.

Short-Term Forecast:  Lower on Cooling Demand Forecasts

In conclusion, the natural gas market is currently under pressure due to cooling demand forecasts and other supply dynamics. Traders are closely monitoring developments in the market, as weather patterns and demand fluctuations remain key factors impacting short-term natural gas prices.

Technical Analysis

Natural Gas sentiment is bearish as prices struggle to gain momentum. The 4-hour chart data indicates that the current price of 2.514 is below both the 200-4H and 50-4H moving averages, pointing to a downward trend. The 14-4H RSI reading of 32.44 suggests weaker momentum, adding to the bearish outlook. Furthermore, the price is below the main resistance area at 2.782 to 2.836, reinforcing the downward pressure. Traders should closely monitor the main support area at 2.487 to 2.542 for potential reversals or further downside movement in the Natural Gas market.