Natural Gas Price Fundamental Daily Forecast – Delayed Restart of Freeport LNG, Milder Weather – Bearish News

Natural gas futures fell to nearly a nine-month low on Tuesday as traders continued to price in next week’s forecast calling for milder weather. The outlook should allow utilities to leave more gas in storage. Gas stockpiles were about 2.4% below the five-year (2017-2021) average for this time of year.

In addition to the mild weather, traders also noted demand for gas was limited by the delayed restart of Freeport LNG’s liquefied natural gas (LNG) export plant in Texas from mid-December to the end of the year.

Some analysts, moreover, have said that even that restart timeline is unlikely, according to Reuters. They do not expect Freeport to return until January or February or even later because it will likely take federal pipeline safety regulators longer than Freeport thinks to review and approve the plant’s restart plan once the company submits it.

On Tuesday, January natural gas futures settled at $5.372, down $0.205 or -3.68%. The United States Natural Gas Fund ETF (UNG) finished at $16.41, down $0.69 or -4.06%.

Refinitiv Supply/Demand Outlook

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.6 bcfd so far in December, up from a monthly record of 99.6 bcfd in November.

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 117.3 bcfd this week to 119.5 bcfd next week. The forecast for this week was higher than Refinitiv’s outlook on Monday, while its forecast for next week was lower.

In other news, the average amount of gas flowing to U.S. LNG export plants rose to 12.0 bcfd so far in December, up from 11.8 bcfd in November. That compares with a monthly record of 12.9 bcfd in March.

Risk that Temperatures Could Trend Even Warmer – Maxar Weather Desk

Even after shedding a monstrous amount of heating demand from the 15-day weather outlook, models have yet to show with certainty any significant cold returning to the Lower 48 before the end of the year. What’s more, if anything, there are risks the data could trend even warmer, according to Maxar’s Weather Desk (MWD).

Early Look at Thursday’s Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) is saying that storage data continued to trickle in for market observers on Tuesday, painting an even less supportive outlook for prices. Early storage withdrawal estimates have whittled down from last week, with the mild temperatures in the forecast likely to flip inventories back to a surplus to the five-year average within weeks.

NGI is modeling a 25 Bcf decline in stocks for the week-ending December 2. This compares with a 49 Bcf withdrawal in the similar year-ago period and the 59 Bcf five –year average.

Short-Term Outlook

The rout is likely to continue until there is a shift toward more heating demand. Buyers are not expected to get any support from Freeport LNG for weeks, maybe months and that is compounding the bearishness.

Remember that the Freeport LNG plant can turn about 2.1 billion cubic feet per day (bcfd). Without it, the demand has to come from somewhere else. Meanwhile, production is up and weather-related heating demand is down. That’s bearish.

Technically, the steep sell-off has put the April 10 main bottom at $4.412 and the December 6, 2021 main bottom at $3.961 the next likely targets.

On the upside, the market has to fill the gap at 6.052 to 6.621 first before it will have a shot at the short-term target at $6.757 – $7.092.