Natural Gas News: Volatility Expected as EIA Storage Report Looms

Higher Ahead of EIA Report

U.S. natural gas futures are experiencing a slight increase on Thursday, amid anticipation of the latest Energy Information Administration (EIA) storage report, expected to show a build in reserves. This report comes at a critical time when weather patterns and demand factors are influencing market trend significantly.

At 12:26 GMT, Natural Gas futures are trading $1.770, up $0.006 or +0.34%.

Storage and Weather Influence

The anticipated EIA weekly storage report is expected to show an increase of about 51 billion cubic feet (Bcf), which is lower than the five-year average of 61 Bcf. This relatively light build is attributed to above-normal temperatures across most regions, except the West, and robust wind energy generation.

Market Reactions

In recent sessions, natural gas futures have shown volatility, dropping approximately 3% to a three-week low due to mild weather forecasts and reduced feedgas to LNG export plants. However, prices rebounded slightly despite the surplus of gas in storage, signaling a complex interplay of supply and demand forces.

Production and Export Trends

U.S. gas production has declined by around 10% this year, as major producers like EQT and Chesapeake Energy scale back operations in response to falling prices. Despite this, the U.S. has emerged as the world’s largest LNG supplier, with fluctuating export volumes influenced by international demand and geopolitical events.

Short-Term Market Forecast

Looking ahead, the natural gas market is expected to see increased volatility. Although there is a temporary reduction in production and exports, upcoming cold weather systems across the U.S. are likely to boost domestic demand significantly. These factors, combined with the current storage levels and ongoing adjustments in LNG operations, suggest a bearish to neutral outlook for U.S. natural gas prices in the short term. Traders should prepare for potential price adjustments as the market reacts to unfolding weather conditions and storage updates.

Technical Analysis

Natural gas futures are rallying on Thursday, making Tuesday’s low at 1.649 a new minor bottom. The minor trend will change to up on a trade through $1.802. This will shift momentum to the upside. If the move is able to gain traction then look for the move to possibly exend into the 50-day moving average at $1.901.

Since the intermediate and long-term trends are down then look for the return of sellers on a trade into the 50-day MA. Overtaking it, however, could fuel an acceleration to the upside.