Natural Gas Prices Expected To Trade Steadily At $3.8 Support Level

The price of a natural gas futures contract for August hovers at $4.015 which is marginally higher than what was recorded earlier this week. On Thursday, natural gas prices rebounded for August since the hot summer season is expected to boost demand for natural gas power.

Due to the hot weather, the use of air conditioners will rise which will lead to an increased energy consumption ultimately. As per forecast by the news bureau Maxar warmer than usual temperature is expected for most parts of the US. It also predicted that the North-Central region would remain the hottest between July 27 and July 31. Temperatures in the Western and Central parts of the US are expected to be higher than normal from August 1 to 5.

On the other hand, EIA’s weekly inventory data was somber for the gasoline prices, showing a bearish trend. In the US the natural gas stocks rose by 49 billion ft3 the week prior thereby surpassing the market’s expectation of 42 billion ft3. In addition, the decline in domestic natural gas consumption had a negative impact on prices. According to data by Bloomberg, US natural gas consumption on Thursday fell by 8.3% year-on-year to 67.1 billion ft3. The Bloomberg statistics showed that natural gas flowing into the US LNG export facility on Thursday was 10.9 billion ft3. This reflects a decrease of 1.5% from last week.

Electricity production in the US has an adverse impact on demand for natural gas demand. According to data from the Edison Electric Institute, the total power generation in the US fell 2.4% year-on-year to 89,603 GWh last week. However, the total power generation in the US over the 52-week period increased by 0.9% year-on-year to 3,995,676 GWh.

The Bloomberg data further revealed that the lowest natural gas production in the United States on Thursday was 91.252 billion cubic feet. This reflected a 2.4% increase year over year.

The oil industry company Baker Hughes reported last week that the number of active natural gas drilling rigs in the US increased by three rigs. This meant that it reached a 1-1/4-year high of 104 units which was way above the historical low of 68 rigs installed in 2020.

As per the Commitments of Traders report by the CFTC the net short spot of natural gas futures rose to 119,404 contracts from 11,350 contracts. There was a decrease of 4,640 contracts in the hypothetical long positions while the short position witnessed an increase of 6,710 contracts.

There is an expectation that the price of natural gas trade steadily and remain above the key support level of $3.8. The modest resistance on the other hand is predicted to remain between $4.178 and $4.295. According to some analysts, natural gas is probably going to be one of the first markets to roll over in the commodity space.