Natural Gas Price Fundamental Daily Forecast – Gains Capped by Mild Weather, Low Demand Expectations

Natural gas futures are trading higher on Thursday shortly after the release of the U.S. Energy Information Administration (EIA) weekly storage report. On Wednesday, the market plunged to a new multi-year low on concerns the coronavirus will have a negative impact on demand, due to the closing of schools, businesses and factories. Additionally, milder weather conditions are also weighing on prices.

At 14:33 GMT, May Natural gas is trading $1.698, up 0.051 or +3.10%.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 9 billion cubic feet for the week ended March 13.

Traders were looking for a much lighter-than-average withdrawal. Natural Gas Intelligence (NGI) reported that a Bloomberg survey showed a median estimate for a 3 Bcf withdrawal, while a Reuters poll landed on a consensus pull of 6 Bcf. Estimates ranged from minus 2 Bcf to minus 11 Bcf. NGI’s model predicted a 1 Bcf withdrawal.

Total stocks now stand at 2.034 trillion cubic feet, up 878 billion cubic feet from a year ago, and 281 billion cubic feet above the five year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for March 18 -24, “Warm conditions will dominate most of the country Wednesday – Friday with highs of 70s and 80s across the southern US and 40s and 50s across the northern US for very light national demand. There will be slightly cool exceptions with highs of 30s near the Canadian border. There will still be weather systems with showers in the days ahead just not very cold ones. A stronger cold shot will push into the central US Friday with lows of 0s to 30s, then across the Great Lakes, Ohio Valley, and Northeast this weekend for a swing back to strong national demand.”

Daily Forecast

The fundamentals are bearish so we have to conclude that technical buying or profit-taking may be behind the strength on Thursday. Traders are also being influenced by firm equity prices and a slight rebound in crude oil prices.

Warmer weather and low demand are likely to keep the pressure on prices, which means rallies are likely to become shorting opportunities.