Natural Gas Forecast: Prices Slip on Milder Weather, Near-Record Production Ahead of EIA Data

Highlights

• Milder weather reduces gas demand and US power consumption.
• Near-record gas production keeps natural gas prices low.
• The EIA expected to report a near-average build in the mid-to-upper 20s Bcf

Overview

Natural gas futures prices are inching lower on Thursday shortly before the release of the government’s weekly storage report at 14:30 GMT.

At 12:30 GMT, June natural gas futures are trading $2.087, down $0.006 or -0.29%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $6.64, down $0.42 or -5.95%.

US Natural Gas Futures Slip on Milder Weather and Near-Record Production

U.S. natural gas futures saw a slight decrease the previous session due to expectations of milder weather leading to lower heating demand. Additionally, near-record production for the month was also contributing to the pressure on prices. Nonetheless, prices continued to hover slightly above the psychological $2 level, with low demand preventing a rally from gaining traction.

Warmer Weather to Reduce US Gas Demand Next Week: Refinitiv

Refinitiv predicted a drop in U.S. gas demand, including exports, from 97.4 billion cubic feet per day (bcfd) this week to 95.3 bcfd next week due to warmer spring-like weather reducing the amount of gas burned to heat homes and businesses.

US Power Consumption to Dip 1% in 2023 on Milder Weather: EIA

The U.S. Energy Information Administration (EIA) also reported on Tuesday that U.S. power consumption is expected to decrease by about 1% in 2023 compared to the previous year due to milder weather slowing usage from the record high reached in 2022. Higher demand is likely to return in July and August when homes and businesses use air conditioners to escape the heat.

EIA Expected to Report Mid-to-Upper 20s Bcf Build in U.S. Gas Inventories

The Energy Information Administration (EIA) is expected to report a near-average build in the mid-to-upper 20s billion cubic feet (Bcf) for changes to U.S. inventories during the week ending April 7.

Bloomberg and Reuters surveys produced injection estimates ranging from 20 Bcf to 35 Bcf, with Bloomberg’s median build at 26 Bcf and Reuters’ at 28 Bcf. The Wall Street Journal poll had a slightly narrower range but still averaged a 28 Bcf injection.

Natural Gas Intelligence’s (NGI) estimate for the week is higher at 35 Bcf. In comparison, the EIA reported an 8 Bcf injection for the same period last year, while the five-year average is 28 Bcf.

Natural Gas Technical Analysis

Technically speaking, the main trend is up according to the daily swing chart. Taking out the new main top at $2.247 will put the market in strong position. If the move creates enough upside momentum then look for a surge into the short-term retracement zone at $2.391.

The market is currently trading on the weak side of a minor pivot at $2.120, making it resistance. This could extend the selling into the main bottom at $1.992.

Trader reaction to $1.992 will set the tone on Thursday.

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