Natural Gas Price Forecast – New Highs Ahead

Key Insights

• The pullback in the natural gas markets was short-lived, and prices are moving towards yearly highs. 
• Energy markets fundamentals remain bullish. 
• Natural gas prices have a good chance to settle above yearly highs and develop additional upside momentum. 

Natural gas prices have moved back towards yearly highs as the bullish trend remains strong. The solid demand for energy in the U.S. and worldwide continues to push energy prices higher, so traders may soon push natural gas prices to new highs.

Energy Markets Stay Tight

The recent data from EIA indicates that working gas in storage is 15.1% lower compared to the five-year average. U.S. crude oil inventories are also 15% below the five-year average for this time of the year, indicating that energy markets remain tight.

The beginning of the driving season and the end of coronavirus lockdowns in China put additional upward pressure on energy markets. Meanwhile, international spot prices remain high.

According to EIA, LNG prices averaged $23.77/MMBtu in East Asia and $26.51/MMBtu in Europe. These high levels have proven to be sustainable, attracting LNG exports from the U.S. The huge spread between U.S. natural gas prices and international spot prices will likely remain intact, which is bullish for U.S. natural gas markets.

Near-Term Dynamics Depend On Weather

Traders will likely remain focused on weather forecasts this summer as hot weather will increase demand for energy, which will be bullish for natural gas markets.

The current situation is already bullish, so unexpected warm weather could lead to a significant rally. Other potential catalysts like oil prices or international spot prices will likely remain bullish in the upcoming weeks. Oil markets react to the start of the driving season, while international spot prices are driven by energy shortage and the challenging geopolitical situation.

At this point, it looks that natural gas prices have enough room for more upside, driven by tight energy markets and increased electricity consumption during the summer.

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