Natural Gas Forecast: Steady in Anticipation of Potential Demand Surge

Highlights

• EIA reports 11% increase in gas reserves.
• Record power demand in heatwave-struck Texas.
• Refinitiv predicts gas demand jump this week.

Overview

U.S. natural gas futures are showing signs of resilience this Monday, making a comeback from a sharp two-day decline that almost nullified last week’s gains. The initial price behavior hints at steady demand forecasts, with potential for even stronger demand looming on the horizon.

Supply Dynamics

The U.S. Energy Information Administration (EIA) disclosed that utilities have injected 29 billion cubic feet (bcf) of gas into storage for the week ending Aug 4. This surpassed analysts’ expectations by 4 bcf and took the total reserves to 3.030 trillion cubic feet (tcf), marking an 11% increase from the five-year average. On the flip side, U.S. energy firms have reduced the count of active oil and natural gas rigs, hinting at possible changes in future output.

Current Demand Conditions

Despite the extended heatwave, especially in Texas where power demand soared to record levels, the robust production has managed to meet domestic needs. Meteorologists anticipate this hotter-than-average trend to continue across the lower 48 states until at least Aug. 26.

Demand and Supply Forecasts

Refinitiv, a prominent data provider, predicts that U.S. gas demand (inclusive of exports) will surge from 103.0 billion cubic feet per day (bcfd) to 104.5 bcfd this week. They attribute this to increased consumption by power generators and rising exports. On the supply side, the average gas output remained consistent, clocking 101.9 bcfd this August, quite close to July’s figure.

Short-term Outlook:  Slightly Bullish

With the balance between rising inventories and higher cooling demands due to persistent hot weather, the natural gas market shows a bullish tendency. The consistent gas production, coupled with potential increments in demand and existing weather conditions, signifies that prices may witness an upward trajectory in the short run.

Technical Analysis

Natural Gas is currently trading at a 4-hour price of 2.810, a small increment from its prior 4-hour price of 2.806. Positioned above its 200-4H moving average (2.671), it reveals a bullish trajectory. Additionally, its placement above the 50-4H moving average (2.707) reinforces this bullish sentiment. The 14-4H RSI, measured at 53.55, denotes a momentum slightly favoring the bulls.

Currently, the commodity is significantly above its main support bracket of 2.542 to 2.487, yet remains beneath the principal resistance territory of 3.027 to 3.091. Piecing together all indicators, the current market sentiment for Natural Gas appears dominantly bullish.