Natural Gas

Natural Gas Price Fundamental Daily Forecast – Pressured by Forecasts Calling for Improving Weather Conditions

Natural gas futures are edging lower on Tuesday as warmer weather in Texas is helping production to recover faster than previously expected from last week’s Arctic freeze that rattled the energy markets last week. Falling spot gas prices are also weighing on the futures markets as well as forecasts calling for improving weather conditions. Nonetheless, traders shouldn’t become complacent with volatility expected to return with the March contract roll-off on Wednesday.

At 13:25 GMT, April natural gas is trading $2.875, down $0.061 or -2.08%.

Short-Term Weather Outlook

NatGasWeather said the more moderate conditions are expected to shift colder late this week, but the latest weather data paints a less cold picture than in earlier outlooks. The data is colder with a second system forecast to follow March 2-4. Overall, though, the set-up for the 12- to 15-day forecast period is bearish, according to the forecaster.

Despite the warmer weather on tap for this week, NatGasWeather said “the damage from the recent Arctic blast has been done.”

The firm expects the 54 Bcf gas storage surplus over the five-year average reflected in last week’s storage report to soon be a deficit of 300 Bcf, “making the background state bullish.”

“It would just be more impressively so if the 12- to 15-day forecast wasn’t so mild,” NatGasWeather said.

LNG Demand Still Sluggish

Natural Gas Intelligence (NGI) reported that liquefied natural gas (LNG) feed gas demand is currently 8.6 Bcf/d, up from a low point of about 1.5 Bcf/d but still 2.5 Bcf/d shy of nameplate, TPH said. NGI data confirmed this level of feed gas volumes. The bulk of the gap is attributable to reduced flows to the Freeport LNG terminal, where all three production units remain offline.

In addition Mexican exports are still roughly 1 Bcf/d below prior levels, according to TPH. This is resulting in a total net demand impact of 3.5 Bcf/d.

Short-Term Outlook

EBW Analytics Group analysts expect “monster draws” to be reported this week and next, eliminating a quarter of the gas in storage to the tune of around 550 Bcf.

Tudor, Pickering, Holt & Co (TPH) struck a similarly bullish tone regarding storage, with analysts indicating “extra tightness” in the market is already reflected in supply/demand data.

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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.