Key Trendline in Focus as Strong Exports Provide Support

Natural Gas, EIA, Exports, NOAA 8-14 Day Outlook – Talking Points

  • Natural gas price supported by strong LNG export figures
  • Short-term price drivers look to weather and weekly EIA report
  • September trendline in focus after second weekly price gain

Natural gas is on track to record a second weekly gain following bullish export figures from the US Energy Information Administration (EIA). US exports of liquefied natural gas (LNG) – the most common medium for transporting the energy commodity overseas — hit a record high in March, according to data released last week from the EIA. March’s export figure was recorded at 317,678 million cubic feet (mcf).

The fresh-record high in exports comes after years of export growth in the heating gas, and that trend is only expected to continue. However, per the last EIA short-term energy outlook, released May 11, the US is expected to export 8.6 billion cubic feet per day(Bcf/d), which constitutes a drop from 9.2 Bcf/d in April. However, peak demand, driven by strong demand in Asia and Europe, is forecasted to increase to 9.0 Bcf/d through June to July. That forecast bodes well for higher prices in the coming months.

EIA US Liquified Natural Gas Exports

Chart created with TradingView

Still, shorter-term weather trends and storage reports may bring some volatility in the near term. The latest 8 to 14-day temperature probability forecast from the National Weather Service (NWS) shows an increased probability for higher-than-average temps across the Northern United States. On the other hand, Texas and the Florida panhandle may see below-average temps (see chart below). Overall, the actual outcome looks to be a slightly bearish one, should the forecast turn out as expected.

NOAA 8-14 day outlook

Source: noaa.gov

Instead, the EIA’s Weekly Natural Gas Storage Report could drive prices. Given we are in the injection season until October, a build in underground storage is typical. According to the DailyFX Economic Calendar, natural gas stocks for the week ending May 28 are expected to increase by 95 billion cubic feet. A smaller-than-expected build may help underpin prices.

Overall, prices may not see their next major move until the next LNG export report, which is not due out until the end of this month. Any large surprises in inventory levels or unusual weather patterns may see volatile trading, however. It is important to note underground storage levels are below the 5-year average, although it isn’t far off from that level (illustrated in the chart below).

eia natural gas storage

Source: eia.gov

Natural Gas Technical Forecast

Price appears to have stalled out after a run higher from the 2.832 swing low last week. The 23.6% Fibonacci retracement appears to be offering a level of resistance as the heating gas attempts to recapture a long-term trendline from the September swing low. Moving above the trendline will likely bring some bullish energy with it.

The May high at 3.150 will shift into focus above the trendline, followed by the 2021 high at 3.316. Above that lies the multi-year high at 3.396. To the downside, support may be found at the 38.2% Fib level. A break lower could see the 20-day Simple Moving Average (yellow line on chart) step in to provide support. Overall, the September trendline is the key technical barrier to watch (red channel on the chart below).

Natural Gas Daily Chart

natural gas chart

Chart created with TradingView

Natural Gas TRADING RESOURCES

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter


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