Natural Gas Prices Forecast: EIA Report Dampens This Week’s Bullish Sentiment

Highlights

• U.S. natural gas futures fell on Friday, contrasting the 1% rise on Thursday.
• The U.S. EIA reported a larger gas storage build than anticipated, pressuring prices.
• Factors bolstering this week’s firm tone: reduced output, increased crude futures, and promising gas demand forecasts.

Overview

U.S. natural gas futures experienced a decline on Friday, despite rallying about 1% on Thursday. The downward pressure came primarily from a U.S. Energy Information Administration (EIA) report indicating a larger-than-expected storage build.

Market Dynamics

On the one hand, gas futures climbed on Thursday due to multiple factors: a dip in daily output, a spike in crude futures, and positive forecasts for gas demand in the upcoming fortnight. Additionally, the Freeport LNG export plant in Texas increased its feedgas intake. On the other hand, the EIA reported that 57 billion cubic feet (bcf) of gas was added to storage during the week ending Sept. 8, significantly more than the 48-bcf build analysts had predicted.

Supply and Demand Factors

Financial firm LSEG notes that average gas output in the lower 48 U.S. states has decreased slightly so far in September, while gas flows to major U.S. LNG export plants have moderately increased. However, due to a decline at the Freeport LNG facility, daily feedgas is anticipated to reach only 12.4 bcfd on Thursday. With the expectation of seasonally cooler weather, LSEG forecasts that U.S. gas demand, including exports, will decline from 100.5 bcfd this week to 96.2 bcfd the following week.

Comparative Analysis

Despite the larger-than-anticipated build reported by the EIA, analysts claim it’s still smaller than usual for this season. The lingering heatwave has forced power generators to burn more gas to keep air conditioners running, sustaining a higher demand. This data comes in the wake of a 1% rise in front-month gas futures for October delivery, settling at $2.708 per million British thermal units.

Short-Term Outlook

Taking into account the mixed signals from supply and demand data, as well as market sentiment influenced by climate conditions, the short-term forecast for U.S. natural gas futures seems bearish. Though fluctuations may occur due to external factors, the current trajectory suggests a cautious approach for traders.

Technical Analysis

Natural Gas is trading at 2.677, having slightly retreated from its previous 4-hour price of 2.715. The current price situates itself between the 200-4H moving average (2.652) and the 50-4H moving average (2.631), suggesting a consolidation phase. The 14-4H RSI stands at 48.33, inching below the neutral line, hinting at a marginal loss in bullish momentum but not distinctly in the oversold territory.

The price remains above the main support zone (2.542 to 2.487) but is yet to approach the main resistance range (2.803 to 2.865). Given these indications, the short-term market sentiment appears neutrally inclined with a slight bearish bias.