Natural Gas Bulls in Control: What's Driving Prices Up

The EIA's bullish surprise and market reaction

US natural gas futures recently experienced a notable increase in value, reaching their highest point since 2022. This surge was primarily driven by a more optimistic weekly storage report from the Energy Information Administration (EIA) than what had been expected. Initially, the market had anticipated two to three storage builds of nearly 100 billion cubic feet (Bcf) during this shoulder season. The boost in momentum was also attributed to cooler weather patterns in the northeastern United States, a region crucial for natural gas demand.

The EIA data revealed a storage build of 86 Bcf for the week ending September 29, which was smaller than the market's forecast of a 92 Bcf build. This unexpected figure surprised those with short positions in the market and was significantly lower than the 126 Bcf increase seen in the previous year and the five-year average increase of 103 Bcf.

Short-term weather forecasts further contributed to this sentiment. A weather system was expected to move across the Midwest, bringing cooler temperatures that could increase the demand for heating. This outlook indicated that temperatures in the Midwest would range from the 40s to the 60s, eventually shifting towards the East. Other weather systems projected for the following week also suggested a trend of moderate or seasonal demand.

Despite the short-term bullish outlook, the Natural Gas Supply Association (NGSA) cautioned that an abundance of storage and slight production increases could potentially dampen prices during the winter season. The NGSA predicted storage levels to reach 3.7 trillion cubic feet (tcf), up from the previous winter's 3.5 tcf, with production expected to rise by less than 1%, it is still reaching a record level.

In the near term, the prevailing market dynamics, especially the bullish EIA report and cooler weather forecasts, indicate a positive outlook for natural gas.

As for the current daily price of natural gas, it stands at 3.209, trading above both the 200-day moving average of 2.688 and the 50-day moving average of 2.708, indicating a bullish trend. The fact that the price remains above these moving averages suggests that the market is currently favoring bullish sentiment. Additionally, the market has surpassed the primary resistance level of 3.002, further emphasizing the bullish sentiment.