Explainer: How has Energy Market React to EIA Report?

Natural Gas Futures Slip Amid Technical Weakness and Storage Concerns

Natural gas futures declined on Wednesday as traders braced for the US Energy Information Administration’s (EIA) weekly storage report. While some market participants attributed the sell-off to changing weather patterns, technical weakness appears to be the primary driver.

Technical Analysis

Prices struggled to maintain momentum above the $3.444 resistance level, leading to a downward move that breached the 200-day moving average at $3.400. If bearish sentiment persists, key support levels to watch include the 50-day moving average at $3.145 and a short-term support zone between $3.118 and $2.993.

Storage Projections

Market participants anticipate a minimal change in natural gas storage levels, with estimates ranging from a 1 Bcf build to a 1 Bcf draw. This projection is significantly below the five-year average withdrawal of 30 Bcf for this time of year.

The subdued expectations stem from last week’s milder-than-normal temperatures in the eastern US, which offset cooler conditions in the western regions. While early forecasts suggest a potential 7-8 Bcf draw due to increased heating demand, higher wind energy generation could mitigate this impact.

Weather Outlook

NatGasWeather reports moderate natural gas demand for Wednesday, with a shift to high demand expected later in the week. A cold system is currently affecting the Midwest, with temperatures in the 10s to 30s Fahrenheit. Meanwhile, the West and New England are experiencing milder conditions. As the week progresses, colder air is expected to spread eastward, potentially boosting heating demand into early December.

Market Outlook

Uncertainty surrounding the EIA storage report and mixed weather forecasts is contributing to volatility in natural gas futures. A smaller-than-expected storage change could exert additional downward pressure on prices. However, stronger heating demand driven by advancing cold weather may provide support and stabilize the market.

In the short term, the outlook for natural gas futures remains neutral to bearish. However, the potential for increased demand from colder weather could lead to stabilization in the coming sessions.