Natural Gas Prices Forecast: Demand Slumps, Yet Volatility Looms Ahead

Highlights

• Natural gas futures see a second-session dip due to various multifaceted influences.
• Europe’s tepid gas demand persists despite threats of Australian LNG strikes.
• Europe’s gas storage sites near full capacity, offsetting potential supply concerns.

Natural Gas Futures Dip Amidst Changing Forecasts

Natural gas futures faced a dip for the second consecutive session on Tuesday. The underlying reasons seem multifaceted, encompassing potential bearish weather forecast changes and reduced demand from Europe. Such influences appear strong enough to overshadow potential bullish factors, such as limited supply from Norway and the looming strike in Australia.

European Demand and Inventory Status

Despite the decreased supply from Norway and threats of strikes at Australian LNG facilities, European gas demand remains tepid. Dutch and British gas prices have seen declines, attributed mainly to high gas inventories and weak European demand. Europe’s gas storage sites are currently operating at over 93% capacity, as per data from Gas Infrastructure Europe. This ample supply has been further supplemented by a reduced demand, thanks to high temperatures across the continent.

Strike Risks and Supply Concerns

Workers at Chevron’s Australian Gorgon and Wheatstone LNG projects plan limited-duration strikes starting September 7. However, without a resolution, they might escalate to a full-scale, two-week strike from September 14. Meanwhile, Norway is shipping less than its usual quota due to various outages. Yet, with Europe’s hefty gas storage, the immediate impact of these outages might be cushioned.

Outlook from Industry Experts

Addressing Gastech 2023, Chevron’s president of midstream, Colin Parfitt, discussed the gas market’s state heading into winter. While Europe boasts high stock levels this year, Parfitt did caution about potential volatility, especially if the winter turns colder than anticipated. He highlighted that the market may remain unpredictable for some years, at least until the new supply streams become operational.

Short-Term Forecast

The gas market may present a bearish trend in the short-term, considering Europe’s existing high stock levels. However, volatility is on the cards due to potential colder winters and until fresh supply pipelines are activated. With memories of last year’s historic highs in global gas prices still fresh, the market remains sensitive to both demand and supply shifts.

Technical Analysis

Based on the 4-hour chart data provided, the current price of Natural Gas is at 2.597, which is below both the 200-4H moving average of 2.663 and the 50-4H moving average of 2.656. This suggests a bearish trend. The 14-4H RSI is at 36.70, indicating an oversold condition but not severely so.

There’s more room to the downside before hitting the main support area between 2.542 to 2.487. Meanwhile, the main resistance area lies between 2.636 to 2.674, which the price would need to break through for a bullish reversal. Given the current data, the market sentiment leans bearish.