Natural Gas Prices Forecast: Bearish Outlook Amid Hurricane, Cooling Trends

Highlights

• Natural gas futures drop with Hurricane Idalia looming over Florida.
• Florida’s power and gas face significant threats; 4.4 billion cubic feet daily consumption in 2022.
• Global gas dynamics shift: 7% price fall at Dutch TTF benchmark despite potential Australian LNG disruptions.

Hurricane Idalia’s Arrival

The U.S. natural gas market felt the pinch as futures dwindled about 2% in anticipation of Hurricane Idalia’s impending landfall in Florida. The hurricane, forecasted to manifest into a major storm with wind speeds of up to 120 mph, poses a significant threat to power and gas consumption in the state. In 2022, Florida’s daily gas consumption stood at 4.4 billion cubic feet, predominantly used for electricity generation.

International Market Repercussions

In the backdrop, the global gas scene is equally dynamic. Despite looming concerns of strikes at Chevron’s LNG plants in Australia, European gas prices at the Dutch TTF benchmark witnessed a 7% fall. Considering Australia, alongside Qatar and the U.S., ranks among the top LNG producers, any disruption in its supplies could trigger global price hikes.

Texas: The Heatwave Aftermath

Texas, still recovering from an unprecedented heatwave, displayed near-record power demand figures. The state’s primary power grid operator, ERCOT, suggested a tight supply-demand balance, with supplies surpassing demand by a mere 2,000 megawatts. To manage the supply constraints, ERCOT previously urged consumers for power conservation post-sunset.

Supply-Demand Projections

August witnessed a slight dip in the average gas output in the lower 48 U.S. states, decreasing to 101.1 bcfd from 101.8 bcfd in July. Despite the easing heatwave, meteorological predictions point to hotter than average temperatures lasting until mid-September. However, Refinitiv projects a decline in U.S. gas demand by 1.3 bcfd next week, factoring in the seasonal temperature transition. Concurrently, U.S. LNG exports in August registered a decrease, attributed majorly to cutbacks at Cheniere Energy’s facilities.

Near-Term Outlook

In light of these developments, the short-term outlook for U.S. natural gas remains bearish, influenced by the potential demand disruption from Hurricane Idalia and anticipated cooler weather conditions.

Technical Analysis

The natural gas market has recently witnessed a minor rise, with the current 4-hour price (2.678) slightly exceeding the previous (2.672). This price is now comfortably above both the 200-4H (2.646) and 50-4H (2.579) moving averages, suggesting a bullish trend is developing. The 14-4H RSI stands at 58.74, indicating moderately strong momentum without being overbought.

In terms of key levels, the price is now testing the main resistance area (2.636 to 2.674), supporting the bullish sentiment.  Overall, the current market sentiment for natural gas on the 4-hour chart appears to be bullish.