Natural Gas Price Fundamental Daily Forecast – EIA Five-Year Average Build is 78 Bcf; Consensus Estimate is 76 Bcf

Natural gas futures are edging higher on Thursday on short-covering and position-squaring ahead of today’s U.S. Energy Information Administration (EIA) weekly storage report. This follows another day of downside pressure fueled by weather-driven demand concerns, flat liquefied natural gas (LNG) levels, and the potential for a higher storage injection that could lead to future containment issues.

At 10:47 GMT, December natural gas futures are trading $3.154, up $0.037 or +1.19%.

Short-Term Weather Outlook

According to NatGasWeather for October 1 to October 7, “The West will be very warm to hot with highs of 80s and 90s, locally 100s over California and the Southwest. An early season cold shot will sweep across the Great Lakes and East the next several days with chilly lows of 30s & 40s, locally 20s, for stronger demand. However, warmer conditions will return next week with highs of 60s to 80s gaining in coverage. Overall, national demand will be moderate to high the next several days, then lighter next week.”

Bulls Counting on Ramped Up LNG Volumes

“With summer heat fading and winter chills unlikely to settle in for several weeks, markets are looking for LNG volumes to ramp up and ease containment worries. U.S. LNG exports to fuel heating needs in Asia and Europe would help soak up excess supply and address imbalance worries,” Natural Gas Intelligence said.

“However, export demand is in part dependent on continued recovery, along with increases in commercial and industrial energy needs amid a coronavirus pandemic that continues to interrupt global economic activity. It has added a unique layer for LNG demand this fall and winter,” according to NGI.

U.S. Energy Information Administration Weekly Storage Report

A consensus of surveys shows that the EIA storage report, due to be released at 14:30 GMT, is expected to show a build of 76 Bcf for the week-ending September 25. This is above the previous week’s reading of 66 Bcf.

NGI is reporting that ahead of Thursday’s report, estimates were running well above the 45 Bcf level as well as last week’s injection. A Bloomberg survey found estimates ranging from 75 Bcf to 86 Bcf, with a median of 78 Bcf, while a Reuters poll found estimates ranging from 74 Bcf to 92 Bcf and a median of 76 Bcf.

A Wall Street Journal survey found estimates from 73 Bcf to 92 Bcf and an average of 80 Bcf. NGI estimated an injection of 80 Bcf. That compares with a 109 Bcf increase in the comparable week last year and a five-year average rise of 78 Bcf.

Daily Forecast

Today’s EIA report could cause some volatility, but this won’t change the bearish near-term outlook. Prices are likely to remain under pressure due to high storage, weak cash and weakening weather demand. I don’t see a sustainable rally in the cards unless there is a considerable pick-up in LNG demand over the next couple of weeks.