Natural Gas Prices Forecast: Futures Soar on Bullish EIA Report and Cooler Weather

Highlights

• Natural gas futures have soared to their highest point since the end of August, bucking earlier forecasts.
• The recent spike owes largely to an unexpectedly bullish EIA weekly storage report, upending anticipations of significant builds this shoulder season.
• Cooler weather trends in the Northeast are ramping up demand, solidifying the commodity’s bullish sentiment.
• The EIA revealed a storage build of 86 billion cubic feet, notably lower than the market’s 92-bcf projection, catching short sellers off guard.

US Natural Gas Futures Gain Momentum on Cooler Weather and EIA Report

US natural gas futures gained ground recently, reaching their highest level since August 31. The spike was primarily driven by a more bullish EIA weekly storage report than anticipated, reversing what was initially expected to be two to three near-100 Bcf builds this shoulder season. NatGasWeather attributed the upward momentum to cooler trends in the northeastern US, a crucial region for natural gas demand.

At 11:40 GMT, Nearby natural gas futures are trading 3.188, up 0.022 or +0.74%.

Market Forces at Play

EIA data revealed a smaller-than-expected storage build of 86 billion cubic feet (bcf) for the week ending September 29. The market had forecasted a 92-bcf build, making the actual figure a bullish surprise that may have caught new short positions off guard. The build was also substantially lower than last year’s 126-bcf increase and the five-year average increase of 103 bcf.

Weather Outlook

Short-term weather forecasts further supported the bullish sentiment. A weather system is expected to move across the Midwest, bringing cooler temperatures that could increase heating demand. NatGasWeather predicts that highs will range from the 40s to the 60s in the Midwest, eventually shifting towards the East. Other systems tracking across these regions next week suggest a trend of moderate or seasonal demand.

Winter Storage and Production

Despite the bullish short-term outlook, the Natural Gas Supply Association (NGSA) indicated that an abundance of storage and marginal production increases could dampen prices this winter. The NGSA predicts storage levels to be at 3.7 trillion cubic feet (tcf), up from last winter’s 3.5 tcf. Production is expected to rise less than 1%, albeit still setting a record.

Short-Term Forecast

Given the current market dynamics, especially the bullish EIA report and the cooler weather forecasts, the short-term sentiment for natural gas appears to be bullish. However, traders should keep an eye on broader supply and demand factors that could exert downward pressure as we move deeper into the heating season.

Natural Gas Technical Analysis

The current daily price of natural gas is 3.209, trading above both the 200-day moving average of 2.688 and the 50-day moving average of 2.708, indicating bullish momentum. While the 50-day and 200-day moving averages are relatively close, the price remaining above them suggests the bulls are in control.

The market also surpassed the main resistance level of 3.002, which further underscores the bullish sentiment. It’s also worth noting that the market is now trading above trend line resistance at 2.819, supporting the acceleration to the upside.

Minor support is at 2.863, while the main support stands at 2.708, providing a safety net.

Based on these technical indicators, the current market sentiment for daily natural gas appears to be strongly bullish.