Natural Gas Hits Predicted 5% Increase: Are More Gains on the Horizon?

Natural Gas Hits Predicted 5% Increase: Are More Gains on the Horizon?

The price of natural gas rose by almost five percent yesterday. Prices rose to their highest level in four months due to lower production and an increase in the amount of feed gas being sent to liquefied natural gas (LNG) export facilities.

Energy traders said prices were still higher but downgraded forecasts of weaker-than-expected demand in the next two weeks and a huge excess of gas in storage

Analysts projected there was currently about 29% more gas in storage than usual for this time of year.

Front-month gas futures NG1! for June delivery on the New York Mercantile Exchange rose 12.5 cents, or 4.8%, to settle at $2.751 per million British thermal units (mmBtu), their highest price since Jan. 17

That kept the abrupt bullish rally for a 12th straight day for the first time since April 2022.

Looking ahead, the premium of futures for November over October which traders use to bet on winter weather and future demand, fell to 29 cents per mmBtu, its lowest level since December 2022 for a second day in a row.

With gas prices up about 62% over the past three weeks, speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to their highest since November 2023, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.

In other news, more than 223,000 homes and businesses in Texas were still without power on Monday after severe storms battered the region last week and over the weekend. Those outages and forecasts for less heat than previously expected have reduced power use in Texas.

The state’s power grid operator, the Electric Reliability Council of Texas (ERCOT), now projects power use will break records for the month of May on Friday and Saturday as homes and businesses crank up air conditioners to escape rising heat. Last week, ERCOT forecast demand would break the May record on Monday

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.2 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, output was on track to drop by around 1.3 bcfd over the past three days to a preliminary one-week low of 96.5 bcfd on Monday.

Meteorologists projected weather across the Lower 48 states would remain warmer than normal through May 29 before turning mostly near normal from May 30-June 4.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.6 bcfd this week to 92.2 bcfd over the next two weeks. Those forecasts were lower than LSEG’s outlook on Friday.

Technical Outlook – Natural Gas

The price of natural gas rose by almost five percent yesterday. Prices rose to a high of 228.90 seen in January this year and reached 227.10.

According to the opinion given on May 16, 2024, this was proven correct. As after breaking the resistance of 204.50, prices reached both anticipated targets of 212-218.50. Since the beginning of the month, we have continued to rise from the level of 155-160.00

The formation of a long bullish candlestick on the chart promises further improvement in the near future. However, after a sudden rally, the price may face resistance at 235.50 before a new rally.

Therefore, another break above 235.50 target at 245-255.00 can be expected, otherwise any short-term decline to attract buying activities.

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