Natural Gas Price Fundamental Daily Forecast – Consensus Calling for 76 Bcf Build in EIA Storage Report

Natural gas futures are edging lower on Thursday in anticipation of a large storage build and new demand uncertainty due to the impact of Hurricane Sally after it left a wake of destruction after it made landfall earlier in the week. Lower spot gas prices also weighed on prices as cooling demand eased along with fading summer heat.

At 11:39 GMT, December natural gas futures are trading $3.107, down $0.013 or -0.42%.

Traders are also worried that the recent wave of cooler temperatures across key demand areas of the United States will lead to a larger-than-normal storage build in this week’s government report.

Hurricane Sally Update

Hurricane Sally delivered strong winds and massive flooding as predicted. “Historic and catastrophic flooding,” the National Hurricane Center (NHC) warned.

As of early afternoon Wednesday, approximately 29.7% of natural gas production in the Gulf of Mexico was shut-in because of Sally, according to the Interior Department’s Bureau of Safety and Environmental Enforcement (BSEE). Around 27.5% of oil output also was shut-in. The lost production estimate was based on 29 operator reports submitted to BSEE.

Short-Term Weather Outlook

According to NatGasWeather for September 17 to September 22, “High pressure continues to rule most of the U.S. with highs of 70s and 80s, except hotter 90s-100s over areas of the West. The eye of Hurricane Sally made landfall overnight along the Southeast Gulf Coast with gusty winds and heavy rain, but with comfortable highs of low 80s. Sally will drift across the Southeast the next few days with heavy rain. A decent cool shot will race across the Midwest and Northeast Thursday thru Saturday with showers and highs of upper 50s to lower 70s, although mostly comfortable elsewhere besides the hotter Southwest, Overall, national demand will be moderate to low.”

U.S. Energy Information Administration Weekly Storage Report

According to Natural Gas Intelligence (NGI), analysts are expecting a plump storage build with the U.S. Energy Information Administration (EIA) latest report on Thursday at 14:30 GMT.

A Bloomberg survey found estimates ranging from 68 Bcf to 81 Bcf, with a median of 78 Bcf, while a Reuters poll found a low estimate of 68 Bcf and a high of 85 Bcf with a median of 80 Bcf. Energy Aspects projected a 90 Bcf build for the week. NGI’s model predicted an 84 Bcf injection for the week-ending September 11.

Last week, the EIA reported an injection of 70 Bcf for the week ending September 4. That build lifted inventories to 3,525 Bcf and kept domestic storage on pace to approach 4.0 Bcf by the end of October, the EIA said. At that level, containment risks could shake up the markets.

Daily Forecast

The worst of Hurricane Sally appears to have missed the energy industry’s major offshore facilities, meaning that production could ramp back up as soon as this week and that output declines could be more than offset by declines in demand imposed by power outages, evacuations and cool temperatures blown in by the hurricane. This paints a bearish picture for prices.

For a look at all of today’s economic events, check out our economic calendar.