Natural Gas Price Fundamental Daily Forecast – Gains Capped as Covid-19 Weighs on Supply, Demand

Natural gas futures are drifting sideways-to-lower early Friday and within a few cents of unchanged as traders wait for direction amid concerns over the rapidly spreading coronavirus and the possibility of a nationwide shutdown. The lack of price movement is surprising, given forecasts calling for milder weather and lower heating demand over the next two weeks.

At 08:32 GMT, May natural gas is trading $1.687, down 0.002 or -0.12%.

Even before the coronavirus started to cut global economic growth and demand for energy, natural gas prices were hovering near their lowest levels in 25 years as record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter.

With milder spring-like weather coming, data provider Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would slide from an average of 105.3 billion cubic feet per day (bcfd) this week to 99.5 bcfd next week.

US Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas fell by 29 billion cubic feet for the week-ended March 20.

Ahead of the report, a Bloomberg survey showed a median prediction for a 30 Bcf withdrawal, while a Wall Street Journal poll showed an average estimate of minus 27 Bcf. A Reuters survey landed on a 25 Bcf withdrawal, matching the 25 Bcf pull predicted by Natural Gas Intelligence’s model. Estimates ranged from minus 14 Bcf to minus 36 Bcf.

Total stocks now stand at 2.005 trillion cubic feet (Tcf), up 888 bcf from a year ago, and 292 bcf above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for March 26 to April 2, “Warm conditions will continue across most of the U.S. the next few days apart from portions of the cooler and showery West. Highs will be very warm across the southern 90s for Texas and Oklahoma, while mild across the Midwest to Northeast with highs of upper 50s to 60s. Weak cool shots will impact the far northern U.S. next week with lows of 20s and 30s for a minor increase in national demand, while remaining very comfortable with highs of 50s to 80s most elsewhere.”

Daily Forecast

We’re probably looking at a sideways trade on Friday as the major analysts continue to update models and data in reaction to the rapidly spreading coronavirus.

Natural Gas Intelligence (NGI) reports, “The coronavirus pandemic has left energy analysts with the unenviable task of trying to light the path forward without the benefit of a historical comparison to offer insight into the present situation.”

“Covid-19 is creating wholly unprecedented impacts across energy markets, compelling radical changes to our forward balance expectations and challenging standard assumptions,” Genscape Inc. senior natural gas analyst Rick Margolin said in a note to clients Wednesday. “The challenge of forecasting is made difficult by the fact that there are no true precedents or analogs for what is happening now and for how long. Thus, we expect our forecast changes to be frequent and potentially stark over the weeks and months ahead.”

Bespoke Weather Services sees hope however. “If the impacts of the virus can be contained and we see improvement into summer, we see upside risks to prices rather easily.”

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.