Natural Gas Price Fundamental Daily Forecast – EIA Weekly Storage Report, Contract Expiration to Set Tone

Natural gas futures are trading higher on Thursday as traders continue to square positions ahead of today’s government storage report and the front-month futures contract expiration that often is the source of extreme price volatility.

Besides the government report and futures expiration, traders were also monitoring near-term weather forecasts and spot market price movement.

NatGasWeather dropped some demand from the outlook for October 6-10. “To our view, after October 5-6 the risk is greater toward colder trends over the East instead of warmer,” the forecaster said. “Prices are still lower on the week even though a decent amount of demand has been added since last week.”

According to Natural Gas Intelligence (NGI), strong heat in the Southeast was countered by cooler temperatures elsewhere, leaving NGI’s Spot Gas National Average at $2.110, down 3.5 cents on the day.

U.S. Energy Information Administration Weekly Storage Report

Traders are looking for today’s EIA report, due to be released at 14:30 GMT, to show an injection in the upper 80s or low 90s Bcf for the week-ending September 20.

Bloomberg analysts are looking for a median 92 Bcf, with estimates from 79 Bcf to 100 Bcf. The Wall Street Journal sees an average 89 Bcf, with a range of 83 Bcf to 96 Bcf. Reuters analysts are looking for 89 Bcf, with responses from 79 Bcf up to 96 Bcf.

Intercontinental Exchange EIA Financial Weekly Index futures settled Tuesday at 92 Bcf. NGI’s model predicted a 90 Bcf injection.

A year ago the EIA reported a 51 Bcf build. The five-year average is a 74 Bcf injection.

Short-Term Weather Outlook

According to NatGasWeather for September 26 to October 2, “A cool shot will sweep across the Midwest the next few days with highs of upper 50s and 60s. A warm system continues to bring showers and thunderstorms to the Southwest, cooling highs into the 80s and 90s, while Texas across to the Southeast will be very warm with highs of mid-80s to lower 90s. A decent cold shot will push into the West this weekend with valley rain and mountain snow with lows of 20s to lower 40s. Overall, lighter demand Thursday through Friday, then increasing as high pressure builds across the South & East, while colder into the West.”

Daily Forecast

Today’s price action will be dictated primarily by the EIA report although we could see some nearby futures contract expiration volatility.

A bullish EIA report could trigger a surge into $2.585 to $2.617. A trade through $2.617 could trigger some buy stops.

A bearish EIA report could lead to a test of yesterday’s low at $2.472. If this fails then look for the selling to possibly extend into the major retracement zone target at $2.440 to $2.368.