Natural Gas News: Futures Surge on Bullish Technical Breakout

Natural Gas Futures Surge on Bullish Indicators

U.S. natural gas futures are soaring on Monday after moving above the 200-day moving average, indicating a bullish trend. The current movement positions natural gas to challenge the May 23 high of $3.159, potentially paving the way for a further rise to the $3.682 to $3.697 range. The driving force behind this surge is the expectation of increased demand due to forecasts of hot temperatures through the end of June.

At 13:49 GMT, Natural Gas futures are trading $3.064, up $0.146 or +5.00%.

Weather Forecasts Fuel Price Rally

Late last week, natural gas futures surged toward the psychological $3 mark, bolstered by weather forecasts predicting a historically hot end to June. Despite a bearish government inventory report, bullish sentiment prevailed, ending a two-week losing streak. NatGasWeather reported a brief easing in strong cooling demand in western regions, but national demand is expected to rebound in the third week of June due to widespread heat. If this hotter-than-normal pattern continues, surplus storage could decrease to around 450 Bcf.

Inventory and Production Insights

The latest U.S. Energy Information Administration (EIA) report showed utilities injected 98 Bcf into storage for the week ending May 31, slightly below the five-year average increase of 103 Bcf. This brought total inventories to 2,893 Bcf, with a surplus of 581 Bcf, or 25% above the historical average. Despite a historical bullish trend, this marks the second consecutive bearish miss, indicating a market loosening of 2.5 Bcf/d week-over-week, though still tighter by 0.8 Bcf/d compared to the five-year average. U.S. dry gas production has been trending lower since peaking at the end of 2023, averaging 102.6 Bcf/d in March 2024.

Impact of LNG and Regional Price Movements

Inflation-adjusted futures prices fell to an average of $1.75 per million British thermal units in March 2024, the lowest in over three decades. The number of active rigs has significantly decreased, with only 101 rigs in operation by May 2024. Liquefied natural gas (LNG) feed gas volumes have declined, partly due to maintenance at Cheniere Energy Inc.’s Sabine Pass LNG export terminal. However, Freeport LNG has shown signs of recovery. Regional price movements varied, with California prices falling and West Texas prices rising for the fourth straight session, driven by summer heat and reduced pipeline maintenance.

Market Forecast: Bullish Outlook

Given the anticipated hot weather and its impact on demand, the outlook for the natural gas market remains bullish. Production constraints and strong summer cooling demand are likely to tighten supplies, supporting higher prices in the near term. Technical indicators suggest that bullish traders should focus on the potential resistance zone at $2.918 to $3.102 as the next target.

Technical Analysis

Natural gas futures are showing a bullish trend on Monday after surpassing the 200-day moving average at $2.950, now serving as a support level. If the upward momentum continues, the rally could extend to the recent high of $3.159. This level may act as resistance initially, but it could also trigger a further rise, potentially reaching the year’s high of $3.697.