Natural Gas Price Fundamental Daily Forecast – Lower on the Potential to Avert a Railroad Strike

Natural gas futures closed sharply lower on Wednesday as forecasts calling for less cold weather than previously forecast weighed on demand expectations for heating. Meanwhile, robust production put further pressure on prices.

Uncertainty over when Freeport LNG would restart also kept a lid on prices. Liquidation by speculators betting on a U.S. railroad strike also drove prices lower after the U.S. House of Representatives voted to block the move.

On Wednesday, January natural gas futures settled at $6.930, down 0.1620 or -2.28%. The United States Natural Gas Fund ETF (UNG) closed at $21.23, down $0.91 or -4.11%.

Uncertain Weather Patterns

“Weather trends have been flip-flopping daily between warmer and colder and that likely aided wild swings” in trading over the final days of November, NatGasWeather said Wednesday. The firm also said that, after weather models trended colder midday Tuesday for Dec. 8-15, data Wednesday reversed warmer for the same period and “lost a decent amount of demand.”

NatGasWeather also said, “A warmer break over the southern and eastern U.S. this weekend into early next week will ease national demand back to lighter levels.”

Refinitiv Supply/Demand Outlook

Data provider Refinitiv forecast 406 heating degree days (HDDs), which are used to estimate demand to heat homes and businesses, over the next two weeks in the Lower 48 U.S. states, is slightly lower than the outlook on Tuesday.

Refinitiv also added that average gas output in the U.S. Lower 49 states has risen to 99.6 bcfd in November, up from 99.4 bcfd in October.

US House Votes to Block Rail Strike, Mandate Paid Sick Leave

The U.S. House of Representatives on Wednesday voted to approve a bill to block a potentially crippling railroad strike and to mandate paid sick time for rail workers.

After the vote, President Biden called on the Senate to act “urgently.” “Without the certainty of a final vote to avoid a shutdown this week, railroads will begin to halt the movement of critical materials like chemicals to clean our drinking water as soon as this weekend,” he said in a statement.

The news rattled the bullish speculators enough to encourage them to liquidate recently initiated long positions.

Looking Ahead…

Thursday’s U.S. Energy Information Administration (EIA) weekly storage report is expected to show a withdrawal of about 89 Bcf. This compares with a decrease of 54 Bcf during the similar week of 2021 and a five-year average withdrawal of 34 Bcf.