Natural Gas News: EIA Report Surprise Sparks Bullish Sentiment in Today’s Market

Natural Gas Futures Poised for Potential Rally

U.S. natural gas futures are trading lower on Friday, consolidating within Thursday’s range. This price action suggests investor indecision and potential volatility ahead.

At 11:53 GMT, natural gas futures are trading $2.085, down $0.040 or -1.88%.

Production Dip and LNG Restart

Natural gas production briefly fell below the crucial 100 Bcf/d mark on Wednesday before rebounding to 101 Bcf/d on Thursday. This temporary decline, coupled with Freeport LNG’s preparations to increase production, could provide support for prices. Freeport LNG has nominated more feed gas, indicating a phased restart of its facility following Hurricane Beryl damage.

Weather Patterns and Demand Outlook

High pressure systems dominate the western and southern United States, pushing temperatures into the 90s and 100s. However, cooler conditions are expected across the Midwest, Plains, and Northeast. This mixed weather pattern suggests a moderate national demand outlook for the next five days.

EIA Storage Report Surprise

Thursday’s EIA weekly storage report showed a net increase of 10 Bcf, significantly lower than expectations of 23-29 Bcf and the five-year average of 49 Bcf. Working gas in storage was 3,209 Bcf as of July 12, 2024, 250 Bcf higher than last year and 465 Bcf above the five-year average. This smaller-than-usual increase could be attributed to Hurricane Beryl impacts, reduced wind energy generation, and the extended Fourth of July holiday weekend.

Technical Levels and Market Sentiment

The psychological $2.00 level may provide initial support, with further support at $1.975 and $1.880. Any upward movement is likely to be sharp, driven by short-covering rather than new buying interest.

Market Forecast

The natural gas market appears poised for a potential rally, particularly if production remains below 100 Bcf/d and Freeport LNG continues its restart process. However, sustained bullish momentum will depend on continued production declines or announcements of output cuts from major producers. Traders should closely monitor these fundamental factors in the short term, as they could trigger a significant price movement in an oversold market.

Technical Analysis

The short-, intermediate- and long-term trends are all down, but the current price action suggests the market may be consoldating. Without a daily closing price reversal bottom, it’s difficult to predict an impending short-covering rally. However, two-consecutive inside trading days may be and early sign that the selling pressure is subsiding.

The market is going to have to overcome $2.208 before we can even talk about the start of a short-covering rally. Until then, be patience and careful selling weakness.