Natural Gas Price Fundamental Daily Forecast – Weaker as Traders Probe for Value Area after Steep Run-Up

Natural gas futures are trading slower shortly before the regular session opening on Monday. The move is a possible continuation of the selling pressure from Friday which was likely fueled by profit-taking, after prices soared earlier in the week, and end of the month position-squaring.

Also helping to support prices last week was improving liquefied natural gas (LNG) volumes and forecasts calling for a cold shot across the East Coast next week that could help jumpstart heating demand.

At 11:44 GMT, December natural gas futures are trading $3.236, down $0.041 or -1.25%.

US Energy Information Administration Weekly Storage Report

Last week’s EIA report covering the week-ending September 18 came in lighter than last week as expected and the price action indicates that traders thought it was bullish.

The EIA reported Thursday that domestic supplies of natural gas rose by 66 billion cubic feet (Bcf). That was smaller than the increase of 77 Bcf forecast by analysts polled by S&P Global Platts. Total stocks now stand at 3.680 trillion cubic feet (Tcf), up 504 Bcf from a year ago, and 407 Bcf above the five-year average, the government said.

There was a lot of interest in this report because traders wanted to know if the previously reported larger-than-normal print was a one-off anomaly or reflective of a looser market.

Last year, EIA recorded a 97 Bcf build for the period, and the five-year average is an injection of 80 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for September 28 to October 1, “Showers continue across the Southeast as remnants of Beta drifts slowly eastward. Hot conditions persist over the Southwest into the Plains with highs of 90s to 100s, while cooling rains continue across the Northwest.

High pressure will rule much of the rest of the U.S. into early next week with comfortable highs of upper 60s to 80s. A major pattern change will occur mid-next week as a strong early season cool shot pushes into the Midwest and Northeast with highs of 40s to 60s, while hot over the West with highs of 80s to 100s. Overall, national demand will be low into the start of this week, then increasing to moderate to high.

Daily Forecast

There were no major weather developments over the weekend, but the short-term forecasts may have changed leading to the early setback.

Demand was expected to be light early this week, followed by strong early season cold shots across the eastern half of the U.S. at the mid-week. These could extend into early next week, leading to a surge in national demand. This gives us hope that the early selling pressure we are seeing will only be a short-term occurrence and that stronger buying will come in at more favorable price levels.

The recent spread activity suggests that traders believe that once the hurricane season eases and disruptions diminish, LNG could gain greater momentum as winter approaches and export demand from Asia and Europe normally increases.