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Natural Gas prices react to latest EIA storage report

The broader context for Natural Gas highlights a sustained downtrend in prices

Source: Bloomberg

Key takeaways:

  • Inventory Levels Versus Demand: The latest EIA storage report suggested weaker demand, a situation exacerbated by warmer weather conditions, leading to a surplus in supply.
  • Market Reaction to Inventory Data: Despite the inventory data being in line with consensus estimates, natural gas prices softened initially.
  • Current Price Trends: Natural gas prices are currently on a sustained downtrend, staying near multi-year lows.
  • Investor Sentiment: As per IG client sentiment data as of March 14th, a vast majority (87%) of IG’s clients with open positions on natural gas are optimistic, expecting prices to rise.
  • Technical Analysis and Future Prospects: The long-term price trend for natural gas remains bearish. Recent patterns indicate a continuation of this trend.

The latest EIA storage report reveals a slight week-on-week decrease in natural gas inventory levels, though stocks remain significantly above both last year's figures and the five-year average, indicative of weaker demand exacerbated by warmer weather. Despite inventory levels aligning closely with consensus estimates, the initial reaction was a softening of prices. The broader context highlights a sustained downtrend in natural gas prices, hovering near multi-year lows and reflecting a decline of over 80% from the highs experienced at the start of the Russia/Ukraine conflict in 2022. This points to a bearish outlook for natural gas, influenced by current inventory surpluses and diminished demand prospects.

IG client sentiment

Source: IG

As of the 14th of March (3pm GMT), 87% of IG’s clients with open positions on Natural Gas expected the price to rise, while only 13% expected the price to fall.

Natural Gas – technical analysis view

Source: IG

The long-term price trend for Natural Gas remains down. In the near term we have seen a continuation of this trend as the price broke out of a flag shaped consolidation. The downside continuation pattern suggests a retest of the multi-year lows at 1590. Trend followers who are short into the move might consider using a close above a one day high as trailing stop loss consideration.
Only on a move back above the dotted trend line on the chart above and 2110 resistance level might a long bias to trades on the commodity be reconsidered.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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