Natural Gas

Natural Gas Price Fundamental Daily Forecast – Will Strengthen as LNG Demand Picks Up

Natural gas futures are trading nearly flat Monday after posting a whip-saw trade earlier in the session. The price action reflected the lack of clarity in the weather models and the timing of restored liquefied natural gas (LNG) movement in the Gulf area devastated by Hurricane Delta.

At 14:28 GMT, December natural gas futures are trading $3.281, up 0.010 or +0.31%.

Natural Gas Intelligence (NGI) reported that analysts at EBW Analytics Group attributed heavy selling in after-hours trading Friday to reports that clearing a sunken barge obstructing the Calcasieu Ship Channel could take three to four weeks, news that put a damper on the outlook for LNG exports out of the Cameron LNG terminal.

Bespoke Weather Services said the market “no longer seems concerned” about the situation of Cameron LNG despite seemingly nothing changing regarding the timeline for clearing the channel.

Short-Term Weather Outlook

According to NatGasWeather for October 19 to October 25, “Cool conditions linger across the Midwest and Ohio Valley in the wake of a weekend cold shot with highs of only 30s to 50s. Most of the rest of the US will be comfortable to warm w/highs of 70s and 80s besides locally hotter 90s over portions of California and the Southwest. Conditions will warm across the Great Lakes/Ohio Valley as the week progresses with highs of 60s & 70s, while still chilly over the Northern Rockies & Plains with 20s – 40s. Overall, national demand will be high today, then low Tuesday – Friday.”

US Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 46 billion cubic feet (Bcf) for the week ended October 9.

Total stocks now stand at 3.877 trillion cubic feet (Tcf), up 388 Bcf from a year ago, and 353 Bcf above the five-year average, the government said.

Natural Gas Intelligence (NGI) reported that “Ahead of the EIA report, a Wall Street Journal survey of 11 analysts expected injections to range from 47 Bcf to 65 Bcf, with an average build of 56 Bcf. A Bloomberg survey of seven market participants had a tighter range of projections, which produced a median of 53 Bcf. Reuters polled 14 analysts, whose estimates ranged from increases of 46 Bcf to 74 Bcf, with a median injection of 55 Bcf. NGI estimated a 54 Bcf injection.”

Based on the estimates, the report was construed as bullish, but the news wasn’t earth-shattering enough to suggest the notion of a prolonged rally.

Daily Forecast

The short-term weather outlook is confusing especially around the October 28 to November 1 time period, where temperatures could turn extremely cold or stay in an average range, depending on which forecast you want to follow.

This means the direction of the market will likely be determined by LNG demand. If producers can overcome the issues in the Gulf then we expect demand to strengthen, which should underpin prices and eventually fuel the start of a strong uptrend.

The combination of cold temperatures and strong LNG demand will be bullish.

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.