Natural Gas Prices Forecast: Weather and EU’s LNG Dependence Shape Gas Market

Highlights

• Natural gas prices influenced by weather.
• Steady supply levels with fluctuating demand.
• EU’s strategic shift underscores US LNG importance.

Weather Dictates the Market

Natural gas prices showed a minor rise on Monday, driven mainly by current weather patterns rather than geopolitical or supply-demand forces. The relatively mild weather across the US has capped demand, but with occasional warm periods in the southern US, there’s a fluctuating need for cooling. The absence of significant events over the weekend, like the conclusion of the Australian strike, also kept the trading landscape fairly calm.

Supply and Demand Dynamics

The US has witnessed consistent and steady supply levels with LSEG reporting an average gas output in the lower 48 states at 102.1 billion cubic feet per day (bcfd) this September. However, there was a minor dip from the 102.3 bcfd record in August. On the demand side, a small decrease in US energy firm rigs could impact future output. Specifically, oil rigs dropped to their lowest since February 2022.

The demand for gas is projected to be fluid due to evolving weather patterns. Although the next week may see a slight decrease in gas demand, with the warmer weather expected in the subsequent week, there could be a resurgence in demand levels. Interestingly, gas flows to major US LNG export plants rose in September compared to August, even though daily averages remain static due to annual maintenance activities.

Trade and International Relations

The gas market is currently being molded by significant trade dynamics. There’s a marked rise in US LNG exports, particularly noticeable in the recent surge of pipeline exports to Mexico this September. On the global stage, the EU is strategically shifting its energy sources, especially in the aftermath of the Russia-Ukraine conflict. This transition underscores Europe’s dependence on US LNG. As Europe strives to lessen its reliance on Russian gas and bolster its renewable energy sector, Ditte Juul Jørgensen’s remarks to the Financial Times underscore the enduring importance of US fossil fuels in the EU’s energy matrix.

A Glimpse Ahead

The near-term forecast for natural gas remains neutral to bearish. The ongoing fluctuations in weather, combined with steady supply levels and varying international demand, especially from Europe, will keep the gas market active. While the mild weather might suppress the immediate demand.

The larger geopolitical landscape and the EU’s pivot towards US LNG indicate a sustained demand in the longer run.

Technical Analysis

Natural Gas’s current 4-hour price stands at 2.661, showing a modest increase from the previous 4-hour price of 2.615. When compared to the 200-4H moving average of 2.667, the commodity is trading slightly below it, while it also lies below the 50-4H moving average of 2.702.

The 14-4H RSI reading is at 47.50, suggesting a slightly weakened momentum but not necessarily oversold conditions.

In terms of support and resistance, the price is hovering above the main support area of 2.500 to 2.425 but remains below the main resistance area ranging from 2.865 to 3.018. Based on these technical indicators, the market sentiment for Natural Gas appears to be neutral to mildly bearish.