Natural Gas Prices Forecast: Geopolitical Tensions, Seasonality Impact Gas

Highlights

• U.S. natural gas futures dip amid temperate forecasts.
• European prices rise due to supply disruptions.
• Asian demand and nuclear capacity add market complexity.

Market Jitters Over Natural Gas Futures

In a subdued start to the week, U.S. natural gas futures are dipping as traders revise their bets on prolonged high temperatures into September. Concurrently, European gas prices are ticking up due to supply disruptions, but U.S. traders remain largely unfazed. The market’s mixed signals are the result of several geopolitical and seasonal factors that investors are weighing cautiously.

U.S. Market Cools Down

Despite a lean storage injection reported by the U.S. Energy Information Administration (EIA) and the continuation of late-summer heat, October Nymex natural gas futures were down 2.1 cents at $2.584/MMBtu. The market seems hesitant, as demand prospects wane with the arrival of milder ‘shoulder season’ temperatures. The absence of robust short-term catalysts is preventing any significant gains in the U.S. market.

European Market Warms Up

On the other side of the Atlantic, Dutch and British natural gas prices rose, with the Dutch October contract up 2.20 euros at 36.70 euros per MWh. The rise is attributed to looming strikes at Australian LNG facilities and ongoing maintenance outages in Norway. Despite being nearly 94% full—higher than usual for this period—European gas storage sites have been unable to completely mitigate the price volatility caused by these supply disruptions.

Asian Influence and Competition

Andy Sommer, head of analysis at Axpo Solutions, suggests that while Europe rarely imports Australian LNG, any prolonged strikes could force Asian buyers to seek alternative sources, intensifying competition between Asia and Europe. In addition, Japan and South Korea, key LNG buyers, have increased their nuclear capacity for the winter, adding another layer of complexity to the demand outlook.

Short-Term Outlook

For the immediate future, the market leans bearish. With plenty of natural gas in storage and few compelling reasons for prices to move significantly higher, investors are treading carefully. While European issues could become more of a wildcard, the overall sentiment suggests more downside risk, particularly in the U.S. market.

Technical Analysis

The current 4-hour price of Natural Gas stands at 2.612, marginally below the previous 4-hour price of 2.613. The commodity is trading below both the 200-4H moving average (2.644) and the 50-4H moving average (2.646), indicating a slight bearish bias. The 14-4H RSI reads 53.93, suggesting a relatively neutral momentum.

Natural Gas has breached its main resistance area of 2.636 to 2.674 but remains above the main support zone between 2.542 and 2.487. Given its positioning relative to key moving averages and proximity to support levels, the market sentiment appears cautiously bearish. However, overcoming the moving averages and the resistance zone could shift momentum to the upside rather quickly.