Natural Gas Price Fundamental Daily Forecast – EIA to Report Light Storage Build; Get Ready for Volatility

Natural gas futures are trading flat-to-lower shortly after the opening on Thursday as traders await the latest weekly government storage report. The price action this week suggests the market may be poised to breakout to the upside with prices being underpinned by rising liquefied natural gas (LNG) demand and the possibility of colder temperatures late October or early November. Traders are also expecting a small storage build in this week’s EIA report.

At 12:10 GMT, December natural gas futures are trading $3.333, down $0.015 or -0.45%.

Rising LNG Demand

Natural Gas Intelligence (NGI) said late Wednesday that confidence is growing that liquefied natural gas (LNG) exports would soon reach their full potential in spite of ongoing issues in two Gulf Coast waterways.

Short-Term Weather Outlook

According to NatGasWeather for October 22-28, “Cold air continues across the Northern Rockies and Northern Plains with chilly lows of 0s to 30s. Much of the western and southern US will be comfortable with highs of 60s to 80s besides locally hotter 90s over areas of California and the Southwest. The East will be warm into next week as upper high pressure holds strong with highs of 60s to 80s, including 70s to NYC.”

“Cold air over the Northern Rockies & Plains will push into Northern Texas and spread across the Midwest/Great Lakes this weekend into next week with lows of 10s and 30s for a swing to stronger national demand. Overall, national demand will be low through Friday-Saturday, then increasing to high.”

US Energy Information Weekly Storage Report

The EIA is scheduled to release its weekly storage report at 14:30 GMT. Analysts are looking for another below-average injection for the week-ending October 16.

According to NGI, “A Bloomberg survey of eight analysts estimated injections to range from 46 Bcf to 56 Bcf, with a median build of 52 Bcf. Reuters polled 14 analysts, whose estimates ranged from increases of 42 Bcf to 56 Bcf, with a median injection of 52 Bcf. The Wall Street Journal surveyed 12 analysts whose estimates fell within that same range, but arrived at a median build of 52 Bcf. NGI’s model also projected 52 Bcf.

Short-Term Outlook

The EIA recorded a 92 Bcf injection for the same week last year, while the five-year average stands at 75 Bcf. Total working gas in storage as of October 9 stood at 3,877 Bcf, 388 Bcf higher than last year at this time and 353 Bcf above the five-year average.

An EIA number below the median could be bullish for prices especially since the LNG exports are expected to continue to increase over the near-term. What could really set this market on fire would be a bullish weather report. The hedge funds are extremely long and probably waiting for bullish weather reports to add to their positions.

Given the 32.5 cents spread between the November and December futures contracts, the next two weeks of trading could be extremely volatile.