Natural Gas Price Fundamental Daily Forecast – Bearish Across the Board, but Ripe for “Sell Rumor, Buy Fact”

Natural gas futures are trading lower for a fourth session ahead of the release of the government’s weekly storage report at 14:30 GMT. The market is being pressured by the lack of extreme heat at the onset of summer, continued liquefied natural gas (LNG) export weakness and expectations of a bearish storage injection.

At 14:17 GMT, August natural gas futures are trading $1.614, down $0.047 or -2.83%.

Short-Term Weather Outlook

According to NatGasWeather for June 25 to July 1, “Weather systems will continue across the east-central U.S. the next several days with showers and comfortable highs of 70s to low 80s. It remains hot over the West into Texas and the Plains with highs of upper 80s to 100s, hottest in California and Southwest deserts. Upper high pressure will strengthen over the Southeast this weekend into next week with highs into the 90s for stronger demand, although countered by weather systems arriving into the West and Northeast where highs will be in the most comfortable 60s to 80s. Overall, demand will be light over the Midwest and east-central U.S. this week, and moderate to strong elsewhere.”

US Energy Information Administration Weekly Storage Report

Traders are looking for the EIA report to show a triple-digit injection for the week-ending June 19. According to Natural Gas Intelligence (NGI), a Bloomberg poll found injection estimates ranging from 100 Bcf to 114 Bcf, with a median of 108 Bcf. A Wall Street Journal survey produced an average build expectation of 105 Bcf, while a Reuters survey of 17 analysts produced a 90 Bcf to 115 Bcf injection range and a median 106 Bcf injection. NGI estimated a 116 Bcf build for the report.

The bearish expectations compare with a build of 103 Bcf during the same week a year earlier and the five-year average build of 73 Bcf for that week.

Rising LNG Export Concerns

Exports of U.S. liquefied natural gas (LNG) feed gas demand could “get a little extra scrutiny” heading into next week as “higher reported cancellations” could see the month of July start off with further declines in feed gas volumes, according to Tudor, Pickering, Holt & Co. (TPH) analysts.

“Industry scuttlebutt pegged June cargo cancellations in the 30-35 range, with July weaker at a speculated 40-45 cancellations,” the TPH team said. “Cargoes can still be cancelled after the window closes (for an incremental fee) and producers can meet delivery obligations by sourcing cargoes from the market, so reported cancellations don’t tell the entire story, but directionally July is shaping up to be weaker than June.

Daily Forecast

Everyone is looking for a bearish EIA report so it could turn into a “sell the rumor, buy the fact” situation. Furthermore, the market may be ripe for a short-covering rally just to release some of the downside pressure. However, this move isn’t likely to last before new sellers arrive.

The mixed weather pattern is of some concern with NatGasWeather looking for heat next week then cooler temperatures for the Fourth of July weekend.

“The data still favors a very warm U.S. pattern the next 15 days, just not exceptionally hot due to weak weather systems consistently finding flaws in the upper ridge to prevent extreme heat,” the forecaster said. “To our view, the onus is squarely on hot weather coming through this summer, and every time it doesn’t, it could lead to disappointment, especially due to hefty surpluses.”

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