Natural Gas

Natural Gas Price Fundamental Daily Forecast – Pressured by Drop in International Demand, Lower Feed Gas Flows

Natural gas futures are inching higher early Tuesday after plunging to a multi-month low the previous session. The price action confirms the obvious. There is just no bullish news out there.

Prices plunged 4.06% on Monday “as worries mounted about declining international demand and lower feed gas flows to U.S. liquefied natural gas (LNG) export facilities,” according to Natural Gas Intelligence (NGI).

At 07:09 GMT, July natural gas is trading $1.779, up $0.005 or +0.28%.

Genscape Reports LNG Feed Gas Decline

Genscape, Inc. on Monday estimated a 1.76 Bcf/d day/day decline in LNG feed gas volumes and cited the drop as the impetus that drove prices lower early Monday and prevented any late recovery, NGI reported.

“These precipitous declines come after an end-of-the-month head-fake as LNG feed gas deliveries rebounded sharply” off May 24 lows of 5.32 Bcf/d to weekly highs of slightly above 6.2 Bcf/d last Tuesday and Thursday, Genscape analysts Preston Fussee-Durham and Allison Hurley wrote in a note to clients.

EBW Also Sees LNG Feed Gas Drop

EBW Analytics Group analysts on Monday estimated a 2 Bcf/d drop in LNG feed gas from last week. The decline “could signal another major leg down in the market, since it could lead to a major further increase in the storage surplus versus last year and five-year average levels. Gas prices could drop to $1.50 or lower later this month,” the firm said.

US Energy Information Administration Weekly Storage Report

The EIA said working gas in storage rose by a net 109 billion cubic feet (Bcf) in the week-ended May 22. Traders had forecast a build of 113 Bcf.

The 109 Bcf injection “does confirm balance tightening, but not enough to suggest that we are significantly lowering the risk of completely filling storage this fall,” Bespoke Weather Services said.

Total working gas in storage as of May 22 stood at 2,612 Bcf, 778 Bcf higher than last year and 423 Bcf above the five-year average, EIA said.

Broken down by region, the East injected 35 Bcf into storage, and the Midwest added 30 Bcf, according to EIA. South Central inventories rose by 24 Bcf, including a 20 Bcf build in nonsalts facilities and 3 Bcf build in salts. The Pacific added 11 Bcf into stocks, while the Mountain range injected 8 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for June 1 to June 7, “A weak cool shot will exit the Northeast Monday with highs of 60s and 70s. Texas, the South, and Southeast will be mostly comfortable with highs of mid-80s through mid-week as a weather system stalls over Southern Texas, although warming into the upper 80s to low 90s late in the week. Cooler air with showers will push into the Northwest, while remaining hot over the Southwest with 90s/100s. The northern US will warm into the 80s as the week progresses, including Chicago to NYC. Overall, light to moderate national demand.”

Daily Forecast

Bearish news continues to dominate the trade. Aggressive speculators may continue to try to pick a bottom and may get lucky once in a while, but without a solid support base in place, it will be difficult to sustain any rally. Furthermore, with the bearish fundamentals, short-sellers will gladly welcome any opportunity to re-short at higher prices.

Sell rallies continues to be the best advice.

For a look at all of today’s economic events, check out our economic calendar.

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.