Natural Gas Price Fundamental Daily Forecast – Low Weather Demand, Freeport Shutdown Capping Gains

Natural gas futures are down about 1.5% late Friday as forecasts for less demand this week than previously expected dampened bullish sentiment.

Traders split the blame for lower demand on the shutdown of the Freeport liquefied natural gas (LNG) export plant in Texas. The shutdown has freed up more fuel for utilities to inject into storage. Meanwhile, cooler weather from thunderstorms helped prevent peak power demand in Texas from breaking the all-time high so far this week.

At 18:05 GMT, August natural gas futures are trading $8.872, down $0.106 or -1.15%. The United States Natural Gas Fund ETF (UNG) settled at $30.04, down $0.33 or -1.09%.

Freeport Shutdown:  Good and Bad News…Depends How You Look at It

According to analysts, the Freeport shutdown would reduce the amount of gas available to the rest of the world, especially in Europe where much of the gas has gone in recent months as countries look to wean themselves off Russian supplies after Moscow’s invasion Ukraine.

However, the decision to shut down Freeport is also leaving more gas in the United States. This will leave more gas in the United States which would give utilities a chance to rebuild extremely low U.S. stockpiles more quickly.

Freeport, the second-biggest U.S. LNG export plant, consumes about 2 billion cubic feet per day (bcfd) of gas, so a three-week shutdown would result in about 42 bcfd more gas being available to the U.S. market, according to Reuters.

Short-Term Weather Outlook

According to NatGasWeather for June 10-16, “Weather systems with showers and thunderstorms continue to sweep across the northern U.S. with comfortable highs of upper 60s to lower 80s.

The southern 1/3 of the U.S. remains hot to very hot with highs of 90s to 100s as high pressure rules, including record setting heat from California to Texas.

Overall, light demand across the northern U.S. and strong demand across the southern U.S.

For next week, hot high pressure will expand north and eastward with highs of upper 80s to 100s, while mild and showery across the Northwest and Northern Plains for strong to very strong demand.”

Short-Term Outlook

National demand Cooling Degree Days (CDDs) next week are expected to be near the hottest of the past 40-years.

However, the overnight U.S. Model (GFS) reverted cooler across the East June 18-21 as weather systems arrive, thereby shifting the hot ridge over the interior U.S. to ease national demand.

The European Model (EC) also cools the East June 18-21, just by not as much as the GFS and why it’s numerous CDDs hotter, according to NatGasWeather.

What this means is the weather is not as bullish as it was earlier in the week. This could put a cap on the market unless the weather forecasts put heat back in during the June 18-21 time period. Furthermore, buyers are likely to be cautious over the next three weeks as repairs are completed on the Freeport Export Terminal.