Natural Gas News: High Supply and Disappointing Storage Data Pressure Market

Natural Gas Futures Extend Losses Amid Bearish Storage Data

U.S. natural gas futures continued their downward trend for the fourth consecutive session on Friday, pressured by disappointing storage data and high supply levels. The market faces bearish sentiment as traders weigh mixed signals from weather forecasts and production outlooks.

At 12:36 GMT, natural gas futures are trading $2.024, down $0.017 or -0.83%.

EIA Storage Report Disappoints Bulls

The Energy Information Administration (EIA) reported a net increase of 22 Bcf in working gas storage for the week ending July 19, 2024. This build exceeded market expectations, which ranged between +11 and +19 Bcf. Total storage now stands at 3,231 Bcf, surpassing both last year’s levels and the five-year average by significant margins.

Weather Forecast and Demand Outlook

NatGasWeather predicts high-pressure systems will bring temperatures of 90s-100s to the southwestern, central, and southeastern U.S. through the weekend. While initial milder conditions are expected in the eastern regions, most of the country is anticipated to warm above normal late this weekend, potentially boosting demand.

Production and Policy Concerns

EQT Corp.’s reaffirmation of its 2024 sales volumes signals a continuation of supply curtailments implemented earlier this year. CEO Toby Rice highlighted the potential impact of a fracing ban, suggesting it could lead to “skyrocketing” gas prices but would be detrimental to American consumers.

Market Forecast

The natural gas market appears bearish in the short term, driven by the higher-than-expected storage build and persistent supply pressures. To alleviate selling pressure, the market would need to see a combination of factors, including:

1. A significant increase in cooling demand due to sustained above-normal temperatures
2. Unexpected production cuts or disruptions
3. A series of below-average storage builds in upcoming EIA reports

Without these bullish catalysts, the market may continue to face downward pressure in the near term. Traders should closely monitor weather patterns, storage data, and any potential policy shifts that could impact production levels.

Technical Analysis

Natural gas prices are heading lower on Friday with traders eyeing last week’s low at $2.015 and the psychological $2.00 level as potential support. However, I don’t think the short-sellers are going to make it that easy for counter-trend buyers.

I think the best spot to start looking for counter-trend activity (i.e. profit-taking and bottom-picking) is $1.907.

Although the market is in a downtrend, the good news for chartwatchers is that the change in trend price has dropped from $3.266 to $2.270.