Natural Gas

Natural Gas Price Fundamental Daily Forecast – EIA Storage Report Could Show 2 -10 Bcf Build

Natural gas is trading slightly higher on Thursday and inside the previous day’s range for a third straight session ahead of today’s government storage report that should mark the start of injection season. The price action suggests investor indecision and impending volatility, which is likely being fueled by uncertainty over the mid- to longer-term weather forecasts.

At 09:35 GMT, May Natural Gas is trading $2.682, up $0.005 or +0.19%.

While most traders will be monitoring the first storage injection, some are watching a potential mid-April cold blast and other are keeping an eye on the Permian cash price, which hit a fresh low earlier in the week. According to NatGasWeather, “Spot gas prices continued to slide Wednesday as high pressure strengthened east of the Plains, sending temperatures into the 50s and 60s across the northern United States and increasing coverage of 70s expected this week-end through early next week.”

Short-Term Weather Forecast

According to NatGasWeather for April 3 to April 9, “High pressure will strengthen east of the Plains with highs of 50s and 60s across the northern US, with increasing coverage of 70s this weekend through early next week, including from Chicago to New York City. The southern US will be warm with highs of 70s and 80s, while slightly cooler exceptions will occur over the West and portions of New England where weather systems will track through. Areas of showers and cooling will increase across the northern and central US mid and late next week. Overall, national demand will drop to low through early next week.”

U.S. Energy Information Administration Weekly Natural Gas Storage Report

The consensus is for a build of 2 Bcf, with guesses as high as 10. This will mark the start of injection season.

Daily Forecast

Last week’s U.S. Energy Information Administration weekly storage report printed a draw from supplies of -36 Bcf. This number reduced supplies to 1,107 Bcf. This week’s report will either show a very small draw or build, but more likely the first build of the season, compared to the 5-year average of -23 Bcf. This means, last week’s report was likely the last draw of this winter season.

While most traders may be watching the weather, I think it’s more important to watch production with the injection season starting with this Thursday’s EIA report. EBW CEO Andy Weissman said, “At current strip prices and if current weather forecasts validate, starting with the April 11 storage week, injections could average more than 100 Bcf/week over a 13-week period, potentially adding as much as 1.4 Tcf to storage versus 900 Bcf over the same period last year.”

This is potentially bearish news because “this string of mega-injections could create a huge year/year storage surplus and slash the deficit versus the five year average to near zero, pushing end-of-season inventories far above acceptable levels and moving the forward curve down by 20-25 cents,” according to EBW.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.