Natural Gas Price Fundamental Daily Forecast – Just Enough Cold in Forecast to Encourage Light Short-Covering

Natural gas futures are inching higher late in the session on Friday after finding support at a three-month low the previous session. Traders said the unexpected strength was fueled by a slight shift in the forecasts to cooler, expectations of higher heating demand over the next two weeks, rising natural gas (LNG) exports and a modest decline in output.

At 20:40 GMT, January natural gas futures are trading $4.099, up $0.043 or +1.06%.

Despite the slight change in the forecast, speculative buyers remained cautious, suggesting the move was likely supported by light short-covering. Temperatures are still forecast to remain milder than normal through at least the middle of December, keeping overall heating demand low for this time of year.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas fell by 59 billion cubic feet (Bcf) for the week-ended November 26. That matched the average decline forecast by analysts polled by S&P Global Platts, and compared with a five-year average decrease of 31 Bcf for the period.

Total stocks now stand at 3.564 trillion cubic feet (Tcf), down 375 Bcf from a year ago and 86 Bcf below the five-year average, the government said.

Output Remains Low; LNG Exports Rise

Data provider Refinitiv said output in the U.S. Lower 48 states averaged 95.9 billion cubic feet per day (bcfd) so far in December, down from a month record of 96.5 bcfd in November.

Refinitiv projected average U.S. gas demand, including exports, would rise from 112.1 bcfd this week and 117.2 bcfd in two weeks as the weather turns seasonably colder and homes and businesses crank up their heaters. Those forecasts were higher than Refinitiv’s outlook on Thursday.

The amount of gas flowing to U.S. LNG export plants averaged 11.47 bcfd so far in December as the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana started producing LNG. That compares 11.39 bcfd in November and a monthly record of 11.48 bcfd in April, Reuters reported.

Short-Term Outlook

“The market has been waking up to the fact that December will be a warmer month than usual,” Refinitiv analyst John Abeln said.

“This doesn’t preclude weather from getting much colder in January or February. But if the first part of

Winter is warm, that does reduce the risk that storage will be at extremely low levels by the end of the Winter withdrawal season,” he said.

Technically, potential support from August 2021 and July 2021 is bunched at $4.009 to $3.716. It may be strong enough to encourage some wide spread short-covering from weaker players.

A strong short-covering rally could fuel a move into the nearest resistance at $4.780. If this happens then look for new shorts to reemerge.