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Natural Gas News: 50-Day Moving Average at $2.604 Last Hope for Bulls in June

By: James Hyerczyk Published: Jun 24, 2024  www.fxempire.com

Key Points:

• Natural gas futures decline for a third session, trading below the 200-day moving average.
• High production levels and a surplus in storage impact natural gas prices despite increased demand.
• Summer demand, driven by electricity generation and LNG exports, changes traditional market patterns.

Natural Gas Prices Under Pressure Amid Bearish Trends

U.S. natural gas futures are under pressure for the third consecutive session on Monday, reacting to last week’s significant drop and a bearish fundamental outlook. The market’s technical picture shows continued weakness, with futures trading below the 200-day moving average and approaching the 50-day moving average, indicating potential further declines.

At 12:30 GMT, Natural Gas futures are trading $2.675, down $0.030 or -1.11%.

Production and Storage Impact

Natural gas futures continued to decline, with prices dropping for the sixth time in seven sessions last Friday. This drop was driven by robust production levels, particularly from the Appalachian region, which mitigated the impact of extreme heat across much of the United States. The latest EIA report indicated that working gas in storage reached 3,045 Bcf, which is 561 Bcf above the five-year average. This surplus suggests ample supply despite high demand from power generation.

Weather Patterns and Market Sentiment

Excessive heat across the Midwest and East boosted spot prices due to increased cooling demand, but futures struggled under the weight of rising production. High-pressure systems dominating the southern and eastern U.S. led to temperatures in the upper 80s to 100s, but traders noted that the market had already priced in these conditions. Additionally, the prospect of cooler temperatures in Texas due to an approaching tropical storm further pressured prices.

Changing Demand Patterns

Natural gas remains a cornerstone of U.S. power generation, expected to provide 42% of electricity this year. Increased demand from data centers and higher overall power usage due to warmer temperatures have driven year-to-date natural gas-fired electricity generation to over 30 million MWh, the highest since at least 2021. Despite this, supply pressures have kept prices in check.

Evolving Market Trends

Natural gas is experiencing changing demand patterns, no longer confined to winter seasonality. Summer demand is driven by the increased use of natural gas for electricity generation and the growth of LNG exports. The international demand for LNG, particularly from Asia and Europe, adds complexity and shifts the traditional seasonality of natural gas. The global shift towards renewable energy sources also influences natural gas markets, with gas serving as a complement to intermittent renewable sources, leading to more consistent demand throughout the year.

Market Forecast

Given the strong production levels and ample supply, the short-term outlook for natural gas remains bearish. While ongoing heatwaves and potential tropical storm disruptions could offer temporary price support, the overall market sentiment is cautious. Traders should closely monitor 10-15 day weather forecasts and storage reports, as these factors will be critical in shaping price movements in the coming weeks.