Natural Gas Prices Forecast: Gulf Weather, Australian Strikes Stir Futures Today

Highlights

• Natural gas futures surge on potential hurricane impact in the Gulf of Mexico.
• Speculators weigh storm trajectory versus Gulf’s key production facilities.
• Australian Chevron workers nearing authorization for potential LNG facility strikes.

Natural Gas Futures Respond to Weather

Natural gas futures spiked significantly as speculators considered potential impacts of a hurricane in the Gulf of Mexico on key production plants. Despite the storm’s eastward trajectory, it is the western Gulf that houses these crucial facilities. While the U.S. National Hurricane Center warns of potential intensification of Tropical Storm Idalia towards Florida, power outages in the state could have bearish consequences for natural gas prices, given Florida’s reliance on gas for electricity.

Industrial Action Down Under

Further influencing global natural gas dynamics, Chevron’s workers in Australia are on the brink of authorizing unions to call strikes at major liquefied natural gas (LNG) facilities. This follows recent votes at Chevron’s Gorgon and Wheatstone facilities, which, combined with Woodside Energy Group’s projects, account for a significant chunk of global LNG supply. The Offshore Alliance union coalition has emphasized its commitment to pushing for improved pay and work conditions, threatening major disruptions to Chevron’s LNG exports.

Chevron’s Mitigation and Broader Context

Chevron, in response, has signaled its intent to implement measures ensuring the continuity of supplies, emphasizing a commitment to reaching solutions beneficial to both workers and the company. This dispute echoes past conflicts, such as Woodside’s recent altercation at its North West Shelf LNG facility, which was eventually resolved without disruptive action.

US Natural Gas Dynamics

Meanwhile, U.S. natural gas futures witnessed a marginal increase last week, buoyed by continued hot weather forecasts driving high electricity demands. Notably, Texas experienced surging power prices, prompting calls for consumer energy conservation. Data from Refinitiv indicates a slight decline in U.S. gas output, while projecting increased demand in the near term, especially for LNG exports.

Short-Term Forecast

Given the interplay of meteorological factors and looming industrial actions, natural gas projections remain unpredictable in the short term. It’s imperative for traders to stay abreast with the unfolding scenario in the Gulf of Mexico and the labor discussions in Australia.

For those speculating on the hurricane’s influence on natural gas prices, a key point to note is that Florida’s coastline doesn’t house natural gas infrastructure, given its tourist-centric nature. Natural gas facilities are predominantly located in Louisiana and Texas. As a result, a hurricane hitting Florida doesn’t necessarily herald a spike in prices.

In fact, traders should avoid knee-jerk reactions to sensational headlines. Only a westward diversion of the hurricane could pose a genuine threat to gas valuations. Moreover, a hurricane-induced power shutdown in Florida might depress prices, given the state’s reliance on natural gas for electricity generation. In essence, no electricity translates to diminished natural gas consumption.

Technical Analysis

The current 4-hour price of 2.619 for Natural Gas is a minor uptick from the previous 4-hour close of 2.613. However, it is trading below both the 200-4H moving average of 2.644 and the 50-4H moving average of 2.570, suggesting a bearish undercurrent. The 14-4H RSI stands at 58.06, indicating stronger momentum but not yet in overbought territory.

The commodity’s current price sits within the main support area of 2.542 to 2.487 and below the main resistance area of 2.636 to 2.674. Given its position relative to the moving averages and the RSI, the market sentiment leans cautiously bearish. However, traders should be prepared for a dose of heightened volatility due to weather concerns.