Natural Gas Prices Forecast: Teetering Between Bearish Storage, Bullish Exports

Highlights

• Volatile week for U.S. NatGas futures as traders await critical EIA storage report.
• Anticipated 97 Bcf storage build likely to add further pressure to gas prices.
• Working gas storage stands robustly above last year and five-year average.

U.S. Natural Gas Futures: Indecision Ahead of EIA Storage Report

Uncertain Terrain U.S. natural gas futures are experiencing a volatile week, displaying cautious trading patterns ahead of the forthcoming weekly Energy Information Administration (EIA) storage report.

As of 10:52 GMT, the futures are trading at $2.980, marking a modest rise of $0.018 or 0.78%. The anticipated storage report is expected to reveal a 97 Bcf build, which would be a slight increase from the previous week’s 90 Bcf net gain.

Supply-Demand Dynamics

Working gas in storage as of September 22, 2023, stands at 3,359 Bcf, 397 Bcf higher than this time last year and 189 Bcf above the five-year average. Despite rising reserves, average gas output in the lower 48 U.S. states has dipped slightly in October. Meanwhile, Equitrans Midstream confirms the Mountain Valley pipeline is on schedule to be operational by year-end, adding another layer to supply expectations.

Weather & Consumption Patterns

Weather forecasts indicate mostly moderate conditions, affecting both heating and cooling demand. While temperatures are expected to drop in the Midwest and Northeast over the weekend, overall national demand remains low. The weather outlook aligns with LSEG’s forecast that U.S. gas demand will hover around 95.1 billion cubic feet per day (bcfd) for the coming week.

Exports & Global Perspective

Rising exports to Mexico and stable flows to major U.S. LNG plants indicate strong overseas demand. With New Fortress Energy’s Altamira plant set to begin operations, analysts expect an uptick in exports. On the global stage, U.S. gas trades around $12 per mmBtu at the Dutch TTF benchmark, and $14 at the Japan Korea Marker, fueled by supply disruptions and sanctions related to the Ukraine crisis.

Short-Term Forecast

In the near term, the market sentiment based on the fundamentals is bearish given the potential storage build and moderate weather conditions. However, upcoming pipeline projects and rising exports could offer bullish tailwinds, making the landscape ripe for cautious optimism among traders. When putting these factors together, we get a neutral, news-driven outlook.

Technical Analysis

Based on the daily chart data for natural gas, the current price of $2.982 sits comfortably above both the 200-Day and 50-Day moving averages, which are at $2.701 and $2.692 respectively, signaling a bullish undertone.

Furthermore, the price is hovering above the main support level of $2.699 but still faces some resistance at $2.812 and $3.002.

With the trend line support set at $2.658, a breakdown below this level could prompt a bearish turn, but for now, the market remains poised for potential upside.

Overall, the market sentiment for daily natural gas appears to be bullish. However, keep in mind that this daily nearby chart is under the influence of last week’s rollover from the October to November futures contract.