Natural Gas Prices Forecast: Futures Surge Amid Global Production Woes

Highlights

• Natural gas futures rise due to reduced U.S. production.
• European production delays affect global supply chain.
• Chevron Australia faces potential full-scale strikes.

Natural Gas Futures Rising with Supply Concerns

In a significant development, natural gas futures have experienced a rise, primarily influenced by a reduction in U.S. production estimates and warmer forecast trends. This progression saw U.S. natural gas futures hovering near a one-week high on Monday due to a significant drop in U.S. output and heightened global gas prices. However, this surge is somewhat mitigated by forecasts predicting milder weather patterns, translating to decreased demand in the following weeks and diminished feedgas towards Freeport LNG.

Supply and Demand Dynamics

Financial firm LSEG reports that average gas production in the lower 48 U.S. states remained consistent in September at 102.3 billion cubic feet per day (bcfd). However, a sharp daily decline is anticipated, potentially reaching a 12-week low. While meteorologists expect the upcoming weather to be close to normal, predictions for the latter half of September are warmer. Subsequently, LSEG expects U.S. gas demand, including exports, to decline in the next week. Concurrently, gas inflows to major U.S. LNG export plants have witnessed an uptick in September. Nevertheless, daily LNG feedgas experienced a drop primarily due to reductions at Freeport LNG.

European Production Delays

Western Europe’s largest gas field, Norway’s Troll, operated by Equinor, has reported extended maintenance delays. An initial completion target for maintenance was September 7th; however, continuous extensions have now postponed full production resumption to September 14th. This delay has resulted in the lowest Norwegian gas flow rates in a decade.

Industrial Disruptions Down Under

Chevron Australia is facing industrial challenges, with no foreseeable agreement with unions, leading to strikes at its Gorgon and Wheatstone liquefied natural gas facilities. Representing more than 5% of the global supply, the potential full-scale strikes at these facilities could disrupt the supply chain significantly. Despite these setbacks, Australia maintains its position as the world’s largest LNG exporter.

Short-Term Outlook

Considering the fluctuating supply-demand dynamics, heightened global gas prices, industrial disruptions, and production delays, the market sentiment for natural gas leans bullish. Investors and traders are advised to monitor these developments closely, especially concerning U.S. production figures and international supply challenges.

Technical Analysis

Natural Gas’s current 4-hour price (2.633) is slightly below the previous 4-hour close (2.636). The price is just below the main resistance area (2.636 to 2.674) and is closely aligned with the 50-4H moving average (2.628) but below the 200-4H moving average (2.643). The 14-4H RSI stands at 57.57, indicating a somewhat strengthened momentum but not yet overbought.

Given the lack of minor support or resistance areas and considering the price’s proximity to major resistance, market sentiment seems cautiously bullish. However, traders should be wary of the resistance ceiling that may cap further gains.