Natural Gas Forecast: Steady After EIA Predicts Price Surge in Q3 2023

Highlights

• Natural gas prices predicted to rise above $3 in Q3 2023
• NatGasWeather forecasts comfortable weather with near-seasonal demand
• NGI predicts higher-than-average natural gas injection

Overview

Natural gas futures are trading nearly flat on Wednesday after failing to follow-through to the upside, following yesterday’s potentially bullish comments from the U.S. Energy Information Administration (EIA).

At 13:00 GMT, May natural gas futures are trading $2.187, up $0.001 or +0.05%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $7.06, up $0.21 or +3.07%.

EIA Predicts Natural Gas Prices to Rise Above $3 in Q3 2023

The Energy Information Administration (EIA) predicts that natural gas spot prices at Henry Hub will average $2.65/MMBtu in the second quarter of 2023. However, prices are expected to increase later in the year, climbing above $3 in the third quarter due to a rise in demand and flat domestic production. The report forecasts a 3% increase in domestic production for full-year 2023 and notes that natural gas inventories are currently at a 19% surplus to the five-year average. The trajectory of natural gas prices will depend on temperatures throughout the summer.

NatGasWeather Predicts Stable Demand for Natural Gas in the Coming Weeks

NatGasWeather reported that there were only minor adjustments to the forecast outlook based on overnight weather data trends.

The next four days are predicted to have lower national demand, but a weather system is expected to move across the northern US from Sunday to Tuesday, which will cause temperatures to drop to the 20s to 30s and increase national demand to seasonal levels, though not significantly.

Following the system’s departure, the period from April 20-26 is expected to be comfortable across most of the US with light national demand and highs of 60s to 80s, according to NatGasWeather. Longer-term forecasts indicate that there will be near-seasonal demand from April 26-May 10, and storage inventories will remain at approximately 350 Bcf above the five-year average.

NatGasWeather suggests that this will keep the state bearish until more intense heat appears in the weather maps, as colder temperatures are quickly running out of time.

NGI Predicts Higher-than-Average Natural Gas Injection

NGI estimates a 35 Bcf injection for the week ending April 7 in anticipation of Thursday’s EIA storage report. This figure is higher than the five-year average injection of 28 Bcf. Meanwhile, during the same period from the previous year, it  recorded an 8 Bcf build, according to EIA data.

Natural Gas Technical Analysis

Technically speaking, the main trend is up according to the daily swing chart. Taking out the minor top at $2.241 has 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.

A failure to follow-through to the upside after the strong close will be a sign of weakness. This could trigger a break back to a minor pivot at $2.120. If this fails then look for a retest of $1.992.

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