Natural Gas Forecast: Steady as Traders Await EIA Weekly Storage Report

Highlights

• Traders await EIA storage report and assess recent sell-off.
• Weather patterns and Texas power demand influence market sentiment.
• Gas exports to Mexico rise, but maintenance affects LNG flows.

Overview

Natural gas futures are trading steady as traders awaited the U.S. Energy Information Administration’s (EIA) weekly storage report, while assessing the impact of a recent sell-off triggered by a shift in short-term demand forecasts.

Profit-taking Fueled by Weather Shift

The U.S. weather forecast for the next 15 days predicts a hot pattern. This is raising questions about the direction of natural gas prices. Some wondered if prices would continue to rise or if profit-taking would lead to a downturn. This is particularly due to the cooling effect in Texas caused by extreme heat. As a result, U.S. natural gas futures experienced a 6% drop. This decline was attributed to forecasts of slightly less hot weather and maintenance outages at liquefied natural gas (LNG) export facilities.

Prices Plunge to Lowest Level Since June 21

Despite this, output decline and hotter-than-normal weather expected through mid-July supported prices. Power demand in Texas reached record peaks due to a heat wave, but Texas wind generation helped alleviate pressure on natural gas consumption for power sector gas burns. The state relies heavily on gas-fired plants for electricity, with wind, coal, nuclear, and solar contributing to the energy mix.

Gas futures for July delivery closed at their lowest since June 21, experiencing the largest one-day percentage decline in over a month. The shift pushed the contract out of technically overbought territory. August futures also declined in anticipation of becoming the front-month contract.

EIA Storage Report:  83 Bcf Build

Average gas output in the U.S. fell in June compared to May. Meanwhile,  meteorologists forecasted hotter-than-normal weather for the Lower 48 states. Refinitiv projected increased gas demand, including exports, for the coming week. U.S. gas exports to Mexico rose in June, but flows to LNG export plants declined due to maintenance, impacting total feedgas.

The EIA’s weekly storage report, set to be released, is expected to show a lower build compared to the previous week. Gas inventories are currently higher than last year but close to the five-year average.

EIA, Weather Forecasts Set the Tone

In summary, natural gas futures held steady as traders awaited the EIA storage report and analyzed the recent sell-off. Weather patterns, maintenance outages at LNG facilities, and power demand in Texas influenced market sentiment. Despite short-term fluctuations, expectations of continued hot weather and shifts in supply and demand dynamics provide a mixed outlook for natural gas prices in the near term.

Technical Analysis

The current market sentiment for Natural Gas is slightly bullish. Despite a minor decline from the previous close, the price remains above both the 200-4H and 50-4H moving averages, indicating strength in the market. The 14-4H RSI is close to the neutral level, suggesting a balanced sentiment between buyers and sellers.

The main support area at 2.681 to 2.717 is former resistance. Considering these factors, the market leans towards a bullish sentiment. However, it is advisable to monitor price movements and additional indicators for confirmation and a more comprehensive analysis of the market’s direction.