Natural Gas Prices Forecast: Futures Face Bearish Pressures as EIA Storage Report Looms

Highlights

• Traders predict EIA report will show an 82 Bcf build, curbing price gains.
• Record 103.6 bcfd output adds to bearish sentiment.
• Volatility at lowest since April 2022, signaling bearish outlook.

Overview

U.S. natural gas futures are currently under pressure, hovering near two-week lows as traders eagerly await the Energy Information Administration’s (EIA) Weekly Storage report. Market sentiment remains subdued due to a combination of record production rates and lackluster demand forecasts.

EIA Storage Report

The forthcoming EIA report is predicted to show an 82 Bcf build, marginally below last week’s 84 Bcf increment. Current working gas storage stands at 3,529 Bcf, which is within the five-year historical range and significantly above last year’s levels. The statistics indicate a relatively robust supply situation, potentially acting as a ceiling for price gains in the short term.

Supply and Demand Dynamics

Financial firm LSEG noted that average gas output in the Lower 48 states hit a new high this month, increasing to 103.6 billion cubic feet per day (bcfd). Despite declining pipeline exports to Mexico, LNG feedgas has climbed to its highest since April 2023, indicating rising export demand. Nonetheless, the domestic demand forecast hovers around a moderate 97.7 bcfd.

Volatility and Market Sentiment

Natural gas futures are experiencing low volatility, recording a 30-day close-to-close futures volatility rate of 49.5%, the lowest since April 2022. The persistent lack of major price moves further indicates a bearish market sentiment. Meanwhile, Chesapeake Energy is in talks to acquire Southwestern Energy, spotlighting consolidation moves in the sector.

Short-term Forecast

The prevailing bearish sentiment, coupled with robust supply and tepid demand, suggests a short-term bearish outlook for U.S. natural gas futures. The asset may continue to struggle until either a substantial change in supply dynamics or a surge in demand occurs.

Technical Analysis