Natural Gas Prices Forecast: Futures Rise Amid Weather, Output Drops, Geopolitics

Highlights

• US natural gas prices rise amid demand and output cuts.
• European gas consumption slumps post Ukraine conflict.
• Chevron-LNG dispute in Australia to set market precedent.

US Natural Gas Dynamics

U.S. natural gas futures showed an upward trend on Wednesday, primarily due to a sharp decline in daily output. This, combined with forecasts of warmer weather, indicates a rise in demand. The surprising element was the surge in prices even after feedgas reductions to Texas’s Freeport LNG plant.

Various speculations hint towards possible reasons such as speculative trading or potential miscalculations in the storage data in the U.S. South Central area. Contrary to the usual pattern of summer gas storage and winter extraction, this summer marked a continuous streak of gas removal, reminiscent of 2017’s patterns.

European Gas Consumption Shrinks

Post Russia’s incursion into Ukraine, Europe has seen a significant dip in its gas consumption, severely affecting the manufacturing sector. While there was hope for a better gas supply in 2023, consumption patterns don’t appear to be recovering. Countries like Germany, Italy, and the Netherlands have reported substantial cutbacks in their gas consumption. Even with the drop in gas futures prices from their 2022 zenith, they are still above the long-term norms. As a result, power producers and industries are in pursuit of alternative resources or are considering downsizing.

Chevron-LNG Workers Conflict in Australia

Chevron has approached Australia’s Fair Work Commission (FWC) seeking resolution regarding an ongoing tiff with workers at its primary liquefied natural gas facilities. With the current laws, FWC might have to enforce an amicable resolution between the conflicting parties. This ruling, eagerly awaited, will set a benchmark. The extent of past negotiations might heavily influence the outcome.

Operational Glitch at Freeport LNG

Freeport LNG in Texas witnessed a sharp decline in its gas intake, signaling an operational challenge. Although historical emission-related setbacks at Freeport typically took about 48 hours to recover, the specific nature of this disruption is yet to be clarified.

US’s Emergence as Leading LNG Exporter

In the first half of 2023, the U.S. reaffirmed its top spot as the global LNG exporter. The Freeport LNG terminal’s reactivation post an eight-month hiatus played a pivotal role in this export boost. Europe and Britain were the primary beneficiaries of these U.S. LNG exports.

Short-Term Outlook

The imminent trajectory for natural gas prices and demand is unpredictable, dictated majorly by geopolitical tensions, infrastructural hitches, and unpredictable weather patterns. Given the unforeseen output cuts from major facilities and projected warm weather in the U.S., prices could soar in the subsequent weeks.

Meanwhile, in Europe, industries might persistently seek alternative energy resources due to high gas future prices. Moreover, the imminent decision from Australia’s FWC concerning the Chevron-LNG dispute will influence regional gas market dynamics.

Conclusively, the tail-end of 2023 is poised for heightened price sensitivity, and unforeseen disturbances might catalyze dramatic price surges.

Technical Analysis

The current 4-hour price of Natural Gas is 2.727, slightly below its previous 4-hour close of 2.728. The price is situated above both the 200-4H moving average (2.647) and the 50-4H moving average (2.628), hinting at a bullish sentiment. The 14-4H RSI reading of 63.67 suggests that the market is exhibiting stronger momentum but is not yet in the overbought zone.

The price hovers above the main support range (2.674 to 2.636) but is significantly below the main resistance area (3.027 to 3.091). Considering these factors, the market sentiment for Natural Gas currently leans bullish.