Natural Gas Prices Forecast: NatGas Landscape Rides on Weather, EIA Reports

Highlights

• U.S. natural gas futures show notable volatility; higher before EIA’s anticipated weekly storage report.
• Previous day observed a 2% slide in futures, pointing to milder weather forecasts and shrinking demand.
• Week-ending Sep 8 saw U.S. utilities store below-average 48 billion cubic feet due to hotter weather.
• Chevron’s Australia projects face potential disruption risks amid plans for intensified strike actions.

Natural Gas Futures Rise and Fall

US natural gas futures have experienced volatility in recent days, with a surge on Thursday ahead of the Energy Information Administration’s (EIA) weekly storage report. The EIA will release its weekly storage report at 14:30 GMT. However, this follows a 2% slide the previous day due to anticipated milder weather and a reduced demand outlook. This demand drop was partially attributed to a decline in gas flowing to LNG export plants, particularly from the Freeport LNG plant in Texas.

Storage and Supply Overview

During the week-ending September 8, US utilities added a below-average 48 billion cubic feet (bcf) of natural gas to storage, driven by a hotter-than-average weather that spurred power generators to burn more fuel. This storage addition was notably less than the same week in the previous year and the five-year average. Early estimates for the week-ending September 15 suggest an average increase of 69 bcf, juxtaposed with a significantly higher increase during the same week last year.

Global Supply Risks and Strikes

Internationally, potential disruptions in supply are brewing. Plans for intensified strike actions at Chevron’s liquefied natural gas projects in Australia could pose increased supply risks. However, Goldman Sachs assesses the likelihood of a sustained outage leading to significant gas price hikes as low. Should the labor dispute be resolved, Dutch TTF natural gas prices might decline for the rest of the summer.

US and Global Production Dynamics

There’s a noticeable hiccup in production at Chevron’s Wheatstone facility in Australia, which shut down a quarter of its LNG production recently, coinciding with strike escalations. Meanwhile, in the US, the average gas output in the lower 48 states witnessed a slight drop from August’s record. A seasonal change with cooler weather approaching could result in a decrease in the US’s gas demand in the coming weeks.

Short-Term Forecast

Given the above dynamics, the short-term forecast appears bearish for natural gas. Factors like milder weather forecasts, reduced demand outlooks, and potential resolutions in labor disputes could cap gains and suppress prices in the coming weeks. However, it’s crucial to monitor production dynamics and the geopolitical landscape for any rapid changes. Today’s EIA storage report could also be the source of volatility if it misses the estimate by a wide margin.

Technical Analysis

In the Natural Gas market, the current 4-hour price of 2.767 has experienced an uptick from its previous value of 2.744. This price is comfortably positioned above both the 200-4H moving average at 2.650 and the 50-4H moving average at 2.625, indicating a prevailing positive momentum. The 14-4H RSI reading stands at 65.14, suggesting the market is gaining strength and approaching overbought territory, though it hasn’t breached the threshold yet.

Regarding support and resistance, the price is currently trading between the main support area (2.542 to 2.487) and the main resistance zone (2.803 to 2.865). Given the current data, the market sentiment leans toward the bullish side. However, this contrasts with the bearish fundamental outlook, suggesting impending volatility.