Natural Gas Prices Forecast: Pressured Ahead of Potentially Bearish EIA Report

Highlights

• Anticipation builds for EIA Weekly Storage Report.
• The consensus estimate is for a build of 81 Bcf, well above average. 
• Record U.S. gas output in October.
• Demand is expected to drop over the next two weeks. 

EIA Weekly Storage Report Anticipation

U.S. Natural Gas futures exhibited a decline overnight as traders eagerly anticipate the U.S. Energy Information Administration’s (EIA) Weekly Storage Report, due to be released at 14:30 GMT.

Consensus estimates predict a build of 81 Bcf. For context, last week saw an increase of 74 Bcf, whereas the reading stood at 99 Bcf a year ago. The five-year average for this time of the year, specifically the week ending October 27, is 57 Bcf.

At 11:30 GMT, natural gas futures are trading $3.408, down $0.086 or -2.46%.

Recent Market Performance

On Wednesday, U.S. natural gas futures experienced a 2% drop, influenced by record production and the anticipation of milder weather which would lead to decreased heating demand over the next two weeks.

A significant 7% surge was observed on Tuesday, causing the front-month gas futures for December delivery to peak at a nine-month high. Nevertheless, on Wednesday, these futures settled at $3.494 per million British thermal units (mmBtu). Notably, despite the fall in prices, the front-month remains technically overbought.

Supply and Demand Dynamics

Financial insights from firm LSEG reveal that the average gas output in the U.S. has set a new record in October, reaching 104.2 billion cubic feet per day (bcfd). On the demand front, milder weather forecasts indicate that gas demand will decline from 109.8 bcfd this week to approximately 103.7 bcfd next week.

Global Standings and Exports

The U.S. continues its momentum towards becoming the globe’s leading LNG supplier by 2023, surpassing current leaders, Australia and Qatar. This is bolstered by soaring global prices, particularly due to supply chain interruptions and sanctions related to the ongoing conflict in Ukraine.

Short-term Forecast

Given the current market dynamics, especially with anticipated milder weather and its impact on demand, the outlook for U.S. natural gas futures projects a bearish tone in the short term. This is further emphasized by the prevailing overbought conditions and anticipated builds from the EIA report.

Technical Analysis

The current daily price of Natural Gas stands at 3.405, below the previous close of 3.494. When evaluated against the 200-day moving average of 2.592, the asset is trading considerably above it, indicating a longer-term upward trend. Comparatively, the price is also above the 50-day moving average of 2.928, reinforcing the bullish sentiment in the shorter term.

The commodity is currently positioned between its minor support at 3.184 and minor resistance at 3.434, with significant room before reaching support 3.184.

Considering these factors, the current market sentiment for Natural Gas is bearish with trader reaction to 3.434 setting the tone.