Natural Gas Forecast: Unexpected EIA Storage Surprise, European Price Drop Impact

Natural gas futures exhibited a marginal recovery on Friday, seeking to bounce back from a notable 6% plunge witnessed on Thursday. Despite this recent volatility, the commodity appears to be poised for a resilient closure to the week, with the interplay of European gas prices and U.S. storage dynamics serving as pivotal factors influencing this narrative.

Thursday's significant depreciation in natural gas prices was distinctly influenced by the latest report from the Energy Information Administration (EIA) in the U.S. The report unveiled that utilities had augmented storage by 29 billion cubic feet (bcf) in the week ending August 4. This accumulation surpassed the projected 25-bcf increment and diverged from the 44 bcf rise recorded during the same period the previous year. At present, gas storage stands at 3,030 Bcf, notably surpassing last year's levels and exceeding the five-year average of 2,725 Bcf.

Across the European gas landscape, specifically in Dutch and British sectors, prices retreated from their two-month pinnacle. This reversal came in the wake of abating concerns regarding potential strikes at Australian liquefied natural gas (LNG) facilities, which had earlier fueled apprehensions of limited LNG supply. Energy consultancy firm Ritterbusch and Associates attributed the subdued European prices to the uncertainty surrounding these labor strikes, ultimately rippling through to impact U.S. prices.

The Lone Star State is experiencing a pronounced surge in power demand, fueled by a persistent heatwave that has prompted air conditioning systems to operate at full throttle. This escalation is poised to shatter previous records. Meteorological forecasts indicate that temperatures across the United States are anticipated to remain above average until August 25, consequently intensifying the demand for natural gas. Moreover, a foreseeable uptick in U.S. gas demand to 104.6 billion cubic feet per day (bcfd) is projected for the upcoming week, buoyed by heightened consumption by power generators and an upswing in exports.

As of now, the current 4-hour natural gas price stands at 2.786, revealing a marginal recovery from the previous 4-hour closing rate of 2.780. The commodity is trading above both the 200-4H moving average (2.671) and the 50-4H moving average (2.636), indicative of a potential bullish momentum. The 14-4H Relative Strength Index (RSI) hovers at 50.04, signaling a near-neutral momentum with a slight positive tilt.

Positioned comfortably between the main support area (2.542 to 2.487) and the primary resistance zone (3.027 to 3.091), the current indications point toward a prevailing bullish sentiment in the Natural Gas market.