Natural Gas Price Fundamental Daily Forecast – Huge EIA Build Raises Containment Concerns

Natural gas futures are trading mixed on Friday after plunging the previous session after the government reported a huge storage build. The news raised concerns over a potentially bearish imbalance while escalating worries about looming storage surpluses as the summer cooling season comes to an end.

At 10:17 GMT, December natural gas is trading $3.095, down $0.002 or -0.06%.

This week’s bearish price action suggests the recent rally was overly speculated and not supported by the current supply/demand situation. Brimming storage levels in September are more indicative of lower prices, something the markets haven’t reflected all month until this week.

U.S. Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 89 billion cubic feet for the week-ended September 11. That was larger than the increase of 77 billion cubic feet forecast by analysts polled by S&P Global Platts.

Total stocks now stand at 3.614 trillion cubic feet, up 535 billion cubic feet from a year ago, and 421 billion cubic feet above the five-year average, the government said.

Last week, the EIA reported an injection of 70 Bcf for the week ending September 4. This week’s build kept domestic storage on pace to approach 4.0 Bcf by the end of October, the EIA said. At that level, containment risks could shake up the markets.

Ahead of the report, a Bloomberg survey found estimates ranging from 68 Bcf to 81 Bcf, with a median of 78 Bcf, while a Reuters poll found a low estimate of 68 Bcf and a high of 85 Bcf with a median of 80 Bcf. Energy Aspects projected a 90 Bcf build for the week. NGI’s model predicted an 84 Bcf injection for the week-ending September 11.

Short-Term Weather Outlook

According to NatGasWeather for September 18 to September 24, “An early season cool shot will sweep across the Midwest, Great Lakes and Northeast the next few days with highs of upper 50s to lower 70s. A second weather system will track into the Northwest with much needed showers and cooling, while the rest of the U.S. will be quite comfortable with highs of 70s and 80s besides the hotter SW into California with highs of 90s and 100s. Remnants of Sally will exit the Mid-Atlantic Coast, while a new tropical system slowly gains strength in the South Gulf of Mexico this weekend. Overall, national demand will be moderate to low.”

Daily Forecast

The huge storage build and very low weather demand over the near-term likely means that without more significant tightening it is going to be hard to avoid containment issues over the next few weeks.

Meanwhile, Natural Gas Intelligence reported that the hefty increase in this week’s EIA report indicated that domestic industrial energy demand and U.S. liquefied natural gas (LNG) volumes, while improving, need to accelerate to offset waning cooling demand as temperatures decline. Absent stronger demand on those fronts, storage capacity could be breached.

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