Natural Gas prices are currently trading at $3.693 which is marginally lower from the recent high of $3.822 registered on July 6. The mixed weather forecast for the remaining weeks of July is keeping prices under pressure.
The Weather Company said that above-average temperatures will be seen in the US northern tier, but below-normal temperatures will be seen for the South from July 18-22. Also, above-average temperatures are expected for the northern tier, while below-normal temperatures are expected for the South from July 23-27.
Weakness in domestic and foreign demand and increasing US gas production is likely to keep pressure on natural gas prices. According to Bloomberg data, US natural gas consumption on Tuesday is down -5.1% y/y at 67.7 bcf and gas flows to U.S LNG export terminals on Tuesday were 10.4 bcf, down -6.4% w/. Additionally, US gas production on Tuesday was at 90.207 bcf, up +1.7% y/y
However, US electricity output data is supportive of gas prices. As per the Edison Electric Institute report, total US electricity output in the week ended July 3 rose +1.9% y/y to 89,212 GWh (gigawatt hours).
On the inventory front, US natural gas inventories rose +16 bcf to 2,574 bcf in the week ended July 2, below the consensus of +31 bcf. Current inventories are down -17.8% y/y and -6.9% below their 5-year average.
As per Baker Hughes report, the number of active US natural gas drilling rigs in the week ended July 9 rose by +2 rigs to 101 rigs, well above the record low of 68 rigs posted in July 2020.
According to the CFTC Commitments of Traders report for the week ended July 6. the net short for natural gas futures increased by 7207 contracts to 108054 for the week. Speculative long position declined by 2718 contracts, while shorts added 4489 contracts.
Natural gas prices are likely to trade firm while above the key support level of 20 days EMA at $3.569 and 50 days EMA of $3.318 however, it is likely to find stiff resistance around $3.809-$3.849