Natural Gas prices react to latest EIA storage report

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

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

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.