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The Impact of Weather Forecasts on Natural Gas Prices
Recent weather forecasts predicting a historically hot end to June have caused natural gas futures to surge towards the $3 mark. Despite a bearish government inventory report, bullish sentiment prevailed, ending a two-week losing streak. NatGasWeather reported a brief easing in strong cooling demand in western regions, but national demand is expected to rebound in the third week of June due to widespread heat. If this hotter-than-normal pattern continues, surplus storage could decrease to around 450 Bcf.
Insights into Inventory and Production
The latest U.S. Energy Information Administration (EIA) report showed utilities injected 98 Bcf into storage for the week ending May 31, slightly below the five-year average increase of 103 Bcf. Despite a historical bullish trend, this marks the second consecutive bearish miss, indicating a market loosening. U.S. dry gas production has been trending lower since peaking in 2023, averaging 102.6 Bcf/d in March 2024.
The Impact of LNG and Regional Price Movements
Inflation-adjusted futures prices fell to a historic low in March 2024, while LNG feed gas volumes have declined. Regional price movements varied, with California prices falling and West Texas prices rising for the fourth straight session, driven by summer heat and reduced pipeline maintenance.
Market Forecast: Bullish Outlook
Given the anticipated hot weather and its impact on demand, the outlook for the natural gas market remains bullish. Production constraints and strong summer cooling demand are likely to tighten supplies, supporting higher prices in the near term. Technical indicators suggest that bullish traders should focus on the potential resistance zone at $2.918 to $3.102 as the next target.
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