Natural Gas Forecast: Holding Steady as Weather and Export Outlooks Steal Focus

Highlights

• US natural gas futures dip on minor weather-related concerns.
• Traders cautious due to small demand shift.
• LNG export demand remains a wildcard factor.

Overview

US natural gas futures are experiencing a minor dip on Monday, following a 1% loss in the previous session. The market’s subdued movement indicates that significant weather events did not occur over the weekend, shifting the focus to this afternoon’s updated forecasts.

The current prices are being held in check due to projections of lower demand for the week, compared to earlier expectations. Despite a drop in daily output and predictions of hotter-than-normal weather continuing into early August, particularly in Texas and California, sellers are cautious and looking ahead 10-15 days.

Bulls Eyeing Return of LNG Demand

The recent price action shows that traders are quick to react to weather forecasts, but the wildcard in the market is the LNG export demand. With many plants expected to end maintenance and resume operations, this factor could have a notable impact.

More Power Demand in Texas

In Texas, power demand hit a record high for two consecutive days earlier this week, and it is likely to break that record again on Friday and the following week. This surge in demand is driven by a lingering heatwave, compelling homes and businesses to keep their air conditioners running at full blast. As Texas primarily relies on gas-fired plants for electricity, the extreme heat boosts the consumption of gas to meet cooling needs.

Refinitiv:  Output, Demand to Rise this Week

Data from Refinitiv indicates that average gas output in the US Lower 48 states increased to 101.5 billion cubic feet per day (bcfd) in July, up from 101.0 bcfd in June. While daily output was on track to decline to a preliminary five-week low of 99.4 bcfd on Friday, there are expectations for gas demand to rise again due to the persistent hot weather and the resumption of LNG export plant operations.

Meteorologists are forecasting that temperatures in the Lower 48 states will remain above normal through at least August 5th. As a result, power generators are likely to consume even more gas in the coming weeks, and LNG export plants are expected to ramp up their fuel consumption as they exit maintenance outages.

Refinitiv’s forecast suggests that US gas demand, including exports, will rise from 105.7 bcfd this week and next to 107.7 bcfd in two weeks. However, it’s worth noting that the forecast for next week is lower than Refinitiv’s previous outlook.

Short-Term Forecast:  Choppy Trade

Overall, the market’s short-term outlook appears to be influenced by weather forecasts and the expectations of increased gas demand both for power generation and export. With these factors in play, traders will likely keep a close eye on developments in the weather and the LNG sector to make informed decisions in the coming days.

Natural Gas

The Natural Gas market is showing bullish sentiment as the current price of 2.696 is above the 200-4H and 50-4H moving averages, indicating an upward trend. The 14-4H RSI reading of 53.05 suggests strong momentum.

The price is above the main support area at 2.487 to 2.542, reflecting market strength, and has yet to overcome the main resistance area at 2.782 to 2.836, implying potential for further gains.

Traders should closely monitor the price’s behavior around the main resistance area to validate the bullish sentiment. If the selling pressure continues to strengthen then look for a retreat into the two moving averages.