Natural Gas Price Forecast – Rally on Cold Weather Forecasts

Natural gas markets have gapped higher to kick off the trading session on Tuesday, reaching towards the $2.95 level. This is based upon colder than temperatures coming in the United States, which of course will drive up massive amounts of demand in this market. That makes quite a bit of sense, because quite frankly the market is very cyclical, and it makes quite a bit of sense that the traders out there would be bidding up the price of the commodity.

NATGAS Video 21.10.20

If we can break above the $3.00 level, the market is very likely to go much higher, perhaps reaching towards the $3.25 level next. After all, this market does tend to rally this time year every year, and as long as we have a “real winter” in the United States, it is very likely that we have further demand. Beyond that, we have seen a lot of bankruptcies during the year, as natural gas has been oversupplied for some time.

All of that being said, that does not mean that we break out to the upside right away. The market more than likely will have the occasional pullback, perhaps down towards the $2.60 level where the 50 day EMA is reaching towards. All things being equal, you certainly cannot short this market anytime soon, so looking at pullbacks as potential buying opportunities makes the most sense. At this point, I am either buying a breakout above the $3.00 level, or buying a pullback, perhaps closer to the $2.65 region.

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

FP Markets Expands Its CFD Trading Offering in Commodities, Metals and Indices.

October 19th 2020, Sydney – Recently awarded as the ‘Best Value Global Forex Broker’ for a second consecutive year, the company continues to set the benchmark in CFDs and Forex and is pleased to announce it has added the following products to its offering:

  • Volatility Index (VIX)
  • Natural Gas (XNGUSD)
  • Platinum (XPTUSD)
  • Palladium (XPDUSD)
  • US Dollar Index (USD Index)

Already offering 60+ Forex currency pairs, the recent decision to add to its CFD offering in commodities, metals and indices is great news with the upcoming US election. Managing Director Matt Murphie commented “The US dollar will be heavily scrutinised in the weeks either side of the US election and the additional products will provide further trading opportunities.  The US election is always an exciting time as we historically see higher levels of volatility in the market. Traders anticipate what the election results will be and devise a trading strategy around it”.

The Volatility Index (VIX), and USD Index are welcomed additions for those looking to trade based on the impact of the election. FP Markets have also created a dedicated US Elections Page which features news updates, webinars, articles and analysis.

The addition of platinum, palladium and natural gas provide more options for those who like to deal with metals and commodities during times of political uncertainty.

Established in 2005, FP Markets has consistently provided traders with tighter spreads and faster execution. Through the use of Raw pricing they are able to aggregate prices across a range of top-tier liquidity providers. Forex and CFD traders seeking optimal trading conditions should look no further.

Click Here for our full list of Forex and CFD products.

Natural Gas Price Prediction – Prices Whipsaw as a Storm Enters the Caribbean

Natural gas prices whipsawed on Monday, making a lower low before rebounding sharply to close up on the trading session. Prices remain buoyed as the weather is expected to be much colder than normal through the plains and the mid-west while warmer than normal throughout most of the East coast of the United States. There is one disturbance moving through the Caribbean that has a 10% chance of becoming a tropical cyclone during the next 48-hours. Tropical storm Epsilon is expected to move toward the east coast of the US but is not likely to impact any natural gas infrastructure. Hedge funds added to long positions in futures and options according to the latest commitment of traders report.

Technical Analysis

Natural gas prices whipsawed and close higher on the session. Prices recaptured resistance which is now short-term support near the 50-day moving average at 2.76. Additional support is seen near the 10-day moving average at 2.72. Resistance is seen near the October highs at 2.95. The 10-day moving average is fast approaching the 50-day moving average and a crossover appears imminent. This would show that a medium-term uptrend is in place. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Hedge Funds add to Long Positions in Futures and Options

Managed money added to long positions and reduced short position in futures and options according to the latest commitment of traders report released for the date ending October 13, 2020. Managed money added 9K contracts to long position in futures and options while reducing short positions by 3K contracts. Hedge funds that are long futures and options outnumber short position in futures and options by 2.5 to one.

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.

Natural Gas Price Forecast – Natural Gas Markets Continue Choppiness

Natural gas markets have rallied a bit during the trading session after initially gapping lower on Monday, showing signs of confusion in choppiness yet again. The $2.65 level has offered a short-term support level, while the $2.80 level above is significant resistance. I think that given enough time we are probably going to see a lot of noisy behavior in this general vicinity, with the $3.00 level above offering a massive amount of resistance. Because of this, it is very likely that we continue to see a lot of back and forth, but it does appear that the upward trend continues. With that being the case, I do not have any interest in trying to get too cute with this trade, I simply want to buy it on short-term dips.

NATGAS Video 20.10.20

The 50 day EMA underneath will of course attract a certain amount of attention, especially as the indicator has been relatively reliable in the recent uptrend. If we can break above the 3.00$ level, then it is likely that the market can continue to go much higher. I do think that it does, as we are heading into a colder time of year for the northern hemisphere.

Furthermore, we have had a significant amount of bankruptcies in the United States, so that has taken some of the supply out of the market. Nonetheless, this is a cyclical time of year for natural gas the typically go higher, so that is something to keep in the back of your mind.

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

Natural Gas Price Fundamental Weekly Forecast – Time Running Out for Demand to Alleviate Storage Concerns

Natural gas futures finished higher last week in a relatively choppy trade. The market gapped higher on Monday in reaction to the damage to platforms from Hurricane Delta. Traders initially thought there would be prolonged production shutdowns, but that wasn’t the case, and prices retreated from the gap high.

Prices edged lower most of the week as weather forecasts flipped from cold to average temperatures, but losses were primary offset by fresh demand for liquefied natural gas.

By the end of the week, traders were monitoring the October 28 to November 1 time period for a possible increase in heat-related demand, but there was enough uncertainty being fueled by the U.S and European weather models to cap gains.

Last week, December natural gas futures settled at $3.271, up 0.067 or +2.09%.

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.

Short-Term Weather Outlook

According to NatGasWeather for October 16 to October 22, “A strong early season cold shot will sweep into the Midwest, Plains, and east-central U.S. the next several days with rain, snow and chilly lows of 15-38 Fahrenheit for stronger national demand.

The rest of the U.S. will be comfortable to warm with highs of 60s to 80s besides hotter 90s from California to Texas. Demand will ease this week as cold shots impact the Rockies and Plains, while comfortable most elsewhere with highs of 60s to 80s. Overall, national demand will be high through Monday, then low Tuesday – Friday of this week.”

Weekly Forecast

December natural gas futures posted another week of volatile two-sided trading as traders assessed the impact on wavering weather outlooks and LNG demand uncertainty. Concerns over storage also pressured prices.

The direction of the market this week is likely to be determined by weather and LNG export demand. If both come in on the high side then look for prices to rally as this news would help alleviate some of the concerns over storage containment.

Another price driver will be the forecast for October 28 – November 1. If the forecasts call for cold temperatures at this time and beyond then look for prices to pop higher. If the forecasts continue to conflict, then look for a sideways to lower trade.

Essentially, in generate a bullish outlook beyond November 1, we’re going to need to see rising LNG demand coupled with above average heating demand.

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

Arab SWFs Struggling with Rentier State Strategies

The last days Abu Dhabi Pension Fund and state-holding company ADQ announced that they will be investing $2.1 billion in ADNOC’s gas pipeline assets, acquiring a 20% stake in the ADNOC subsidiary with lease rights to 38 gas pipelines covering 982 kilometers.

The Abu Dhabi fund will partner in deal announced in June by a consortium of Global Infrastructure Partners (GIP), Brookfield Asset Management, Singapore’s sovereign wealth fund GIC, the Ontario Teachers’ Pension Plan Board, NH Investment & Securities and Italy’s Snam. The latter groups stated they will invest $10.1 billion in ADNOC gas pipeline assets for a 49% collective stake. ADQ, set up in 2018, is the owner of Abu Dhabi Ports, Abu Dhabi Airport and bourse operator ADX.

At the same time another Abu Dhabi SWF Mubadala announced that it has taken a 3.1% stake in the Spain-based gas system operator Enagas. The new stake falls in line with Mubadala’s investments in other Spanish assets in the oil and technology industries. Enagas owns stakes in firms in the Mediterranean region, Latin America and the United States.

Mubadala also announced that it invests 200 million euros ($235 million) in German pharmaceutical company Evotec SE as part of the Abu Dhabi wealth fund’s plans to expand its portfolio. The Abu Dhabi-based fund, managing around $232 billion, has engaged on a diversification strategy plowing mainly its cash in technology to prepare for a less-crude dependent future. Mubadala Investment stated that it will subscribe to 9.2 million Evotec shares, taking about a 5.6% stake in a private placement. In September, Mubadala acquired a 5% stake in private equity firm Silver Lake.

The Abu Dhabi moves stand contrary to its main rival Qatar’s Qatar Investment Authority (QIA). The latter, holding the main revenues of the former OPEC-member, officially has already assessed its own hydrocarbon sector companies investments. Mansour Al Mahmoud, QIA’s CEO, stated at an International Institute of Finance event that QIA has more than half of its assets invested in private equity and listed shares as it chases higher returns.

He indicated that QIA’s “approach is always to be a long-term investor, this gives us an advantage”. With around $295 billion in assets, the fund is now active mainly in stocks, private equity and venture capital. Mahmoud added that QIA had stopped investing in fossil fuel companies.

Still, roaming through last weeks’ media reports, the picture is diffuse. Arab SWFs also are reported to have invested in the Russian Sovcomflot IPO last week. The Russian entity has listed 17.2% of the company on the Moscow Stock Exchange, raising US$550M.

The Russian government still holds 82.8% of the shares in the company. The Sovcomflot IPO was supported by global bookrunners and coordinators, VTB Capital, Citi, Sberbank, JP Morgan and Bank of America. Russian sources stated that the shares were purchased by retail investors with the state Russian Direct Investment Fund (RDIF), Russia’s sovereign wealth fund.

Russian Direct Investment Fund CEO Kirill Dmitriev stated that main partners have come from leading sovereign wealth funds in the Middle East and Asia. Saudi Public Investment Fund, ADIA, QIA and others all are working with RDIF. Sovcomflot wants to expand in the key areas of sea energy transportation and seismic exploration. It will also help serve existing Russian and international energy projects more efficiently and participate in the development of new routes, including through the Northern Sea Route and the Arctic zone of the Russian Federation.

The above painted picture however is more opaque than shown in media. Arab SWFs are increasingly being tasked to fill in the financial gaps in their domestic markets, as oil and gas revenues of most Arab petrostates are dwindling. With COVID-19 continuing, global oil and gas demand destruction still high, and future prices still under extreme pressure, government revenues are not sufficient to cover budget deficits.

As has been shown in Saudi Arabia, the call on Aramco to provide additional cash, is growing, which is not different from the UAE, Bahrain, Kuwait and Qatar. The latter is even hit twice, as its major LNG projects and possible liquefaction expansion plans are facing a major global gas glut forcing prices to historically low levels. Dwindling Petrodollars are a fact of life for the coming years. The latter situation already is showing its ugly face in the Arab financial sectors too. Instability in the banking and financial markets in the region are increasing, as was reported also by ratings major S&P, in a recent report.

The latter stated that risks in the banking sector including reduced profitability as “the pandemic and drop in oil prices could mark the start of a new era” are continuing. The report indicated that “rated banks in the GCC face an uphill struggle in the next 18 months due to the protracted nature of the economic recovery and the expected gradual withdrawal of regulatory forbearance measures”. The Samba-NCB merger in Saudi Arabia is one of the outcomes already.

The latter ripples will for sure put a damper on the attractivity of Arab SWFs too. If the financials of these sovereign wealth giants are depressed further, oil-gas and construction or infrastructure projects in the region will feel the impact. Lower financial liquidity could impact possible future projects of Aramco, ADNOC, NOGA, QP or KOC, leading to a possible scenario as now is being shown by IOCs such as Shell, BP and Equinor. Less financial strength of Arab oil companies will not have a ripple effect on oil production and prices, but will be a Tsunami of unknown order.

Middle East Sovereign Wealth Fund Direct Transactions Comprise Larger Portion of Investments

Data: SWFI.com (SWFI Asset Owner Terminal)

Filter: Sovereign Wealth Funds. Amount Min: US$ 10,000,000. Type: Deal, New Security Issue, Open Market. No fund commitments.

Direct Sovereign Wealth Fund Transactions – Middle East and Asian SWFs Transaction Amount as a Percent of All SWF Transaction Amount

Year Gulf SWF Transactions / All SWF Transactions Asian SWF Transactions / All SWF Transactions
2020* 42.32% 22.09%
2019 26.98% 38.65%
2018 22.59% 49.12%
2017 15.64% 38.40%
2016 19.27% 36.34%
2015 18.19% 69.01%
2014 22.46% 46.24%
2013 13.13% 23.57%
2012 26.87% 46.89%
2011 33.49% 38.93%
2010 33.43% 41.12%
2009 42.94% 37.17%
2008 38.60% 47.98%

Natural Gas Price Fundamental Daily Forecast – Bulls Hoping for Weather, LNG Demand to Align

Natural gas futures finished higher on Friday but did give back some earlier gains. Nonetheless, the market was able to hang on to enough of its gains to finish better for the week. The choppy trade at the end of the week was the product of uncertainty over liquefied natural gas (LNG) and weather demand and whether the two key factors can combine to curtail a potential toppling of storage inventories before heating season begins on November 1.

On Friday, December natural gas futures settled at $3.271, up 0.010 or +0.33%.

Inconsistencies in End of Month Forecast

Prices rose early Friday as an increasingly chillier weather pattern emerged for the end of October, but with two weeks to go before that time, doubts of its development surfaced throughout the session, encouraging the early buyers to trim their speculative long positions.

Sellers credited the midday Global Forecast System (GFS) for the intraday setback. The GFS continued to favor cold slowly easing across the northern and central United States October 29 – November 1, while hinting the cold air could hold longer, NatGasWeather said. However, its data also showed inconsistencies after October 24-25.

“What’s likely to be of greatest importance is how the weather data trends for October 28-November 1 and whether cold shots can prove to continue into the northern United States,” the forecaster said.

Another inconsistency is the European model, which favors a milder pattern gradually returning October 28 to November 1. Meanwhile, the GFS model shows demand slowly easing but trying to maintain its strength a little longer during the same time period.

NatGasWeather noted that it was important to consider that the GFS model has had “credibility problems” to start the heating season by over-forecasting cold shots, which is evidenced by giving back a huge amount of demand for the coming week.

Short-Term Outlook

Friday’s firm but choppy price action confirms the influence of the inconsistencies in the weather pattern, but it also reaffirms the notion that buyers aren’t going to gain confidence in playing the long side of the market aggressively until consistent cold weather demand aligns with strong LNG demand. Until we see this potentially bullish combination emerge, fear of containment issues will continue to keep a lid on prices.

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

Natural Gas Weekly Price Forecast – Natural Gas Building Pressure

Natural gas markets have been rather noisy during the trading sessions making up this past week, reaching down towards the 200 week EMA before turning around to form a bit of a hammer shaped candlestick. This does not mean that the market is necessarily ready to take off to the upside, but it clearly has a proclivity to gain. Because of this, I like the idea of buying dips and of course this lines up quite nicely with the time of year as more demand for natural gas is typically the norm. With that in mind, the market is likely to be a “buy on the dips” scenario, but I think that eventually we will try to break above the $3.00 level.

NATGAS Video 19.10.20

Breaking above the $3.00 level, then we would be looking at a potential move towards the $3.25 level, possibly even followed by the $3.50 level. I do not like the idea of shorting this market, at least not this time of year. There is a lot of noise underneath and of course that means that there is a lot of order flow. That order flow gives the opportunity for traders to take advantage of liquidity, thereby buying more contracts.

If we were to break down below the $2.40 level, then we may have to “reset” closer to the 50 week EMA, and of course the psychologically important $2.00 level. All things being equal though, between the hurricanes in the threats to supply disruption, we have had a nice little rise higher and what typically would be the case anyway. I believe buying dips should continue to work.

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

Natural Gas Price Prediction – Prices Rise on Cold Weather Forecast

Natural gas prices moved higher on Friday as colder than normal weather is expected to cover most of the mid-west for the next two weeks. This cooler weather will be offset by warmer than normal weather which is expected to cover the entire east coast. The number of natural gas rigs increased by one in the latest week according to Baker Hughes. The total number of active oil and gas rigs increased for the week by 13, with oil rigs rising by 12 and gas rigs rising by 1. Total oil and gas rigs in the United States are now down by 569 compared to this time last year.

Technical Analysis

Natural gas prices rallied 1.1% on Friday, remaining above support near the 50-day moving average at 2.76. Resistance is seen near the October highs at 2.95. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Natural Gas Generators Take Market Share

Based on the U.S. Energy Information Administration’s (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source.

Natural Gas Price Forecast – Natural Gas Shows Signs of Exhaustion

Natural gas markets have rallied initially during the trading session on Friday but found resistance on the $2.85 level. By showing quite a bit of negativity in that area, it looks as if we are still waiting to find the momentum to go higher. All things being equal, the $2.60 level underneath is going to continue to be supportive, just as the 50 day EMA reaching towards it should be relatively supportive as well. All things being equal, I do think that the market continues to go higher, perhaps reaching towards the $3.00 level.

NATGAS Video 19.10.20

Recently, we have seen a significant amount of volatility in the natural gas markets due to the fact that the hurricane blew through the Gulf of Mexico this week, and we have seen more than one of those out of late. Furthermore, the market is also taking a look at the idea of colder temperatures coming to the northern hemisphere, which leads to a cyclical trade anyway. We are trading the November contract, so it does make sense that the market should rise overall.

At this point, the market continues to be very noisy, but I think it offers more of a “buy on the dips” type of situation. I do not have any interest in shorting natural gas, at least not this time of year. At this point, it is simply a matter of looking for value and taken advantage of it every time the market offers it. If we can break above the $3.00 level on a daily close, then it is likely that we go looking towards the $3.25 level above.

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

Natural Gas Price Prediction – Prices Rise Following Inventory Report

Natural gas prices moved higher on Thursday following a smaller than expected build in natural gas inventories. The weather is expected to be colder than normal in the northern plains and mid-west over the next 8-14 days but warmer than normal across most of the east coast which could offset any increase in heating demand. There are currently no weather disturbances that are expected to generate a tropical cyclone over the next 48-hours according to the National Oceanic Atmospheric Administration.

Technical Analysis

Natural gas prices moved higher on Thursday, making a lower high and a higher high and rebounding back above resistance near the 10-day moving average at 2.75, which is now seen as short term support. Resistance is seen near the November highs at 2.95. Short-term support has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is neutral as the MACD (moving average convergence divergence) histogram is printing in positive territory with a flat trajectory that points to consolidation.

Natural Gas Inventories Build Less than Expected

Natural gas in storage was 3,877 Bcf as of Friday, October 9, 2020, according to the EIA. This represents a net increase of 46 Bcf from the previous week. Expectations were for a 51 Bcf build according to survey provider Estimize. Stocks were 388 Bcf higher than last year at this time and 353 Bcf above the five-year average of 3,524 Bcf. At 3,877 Bcf, total working gas is above the five-year historical range.

Natural Gas Price Forecast – Natural Gas Recovered Quite Nicely

Natural gas markets have rallied significantly during the trading session on Thursday, reaching towards the $2.80 level as we continue to see the idea of demand for natural gas increase. The temperatures are starting to fall in the United States again, and that of course has a lot to do with what will happen in the short term. I think that the $3.00 level above is a major area of resistance and target, so it is worth paying attention to. If we can break above the $3.00 level, then we could go towards the $3.25 level after that.

NATGAS Video 16.10.20

To the downside, the 50 day EMA is sitting right around the $2.50 level, and I think will offer a certain amount of support. The markets have shown quite a bit of proclivity to continue to go to the upside due to the fact that we have also had not only colder temperatures but also have had to deal with hurricanes and a threat to supply. All things being equal, this is a market that I think will continue to try to grind higher for at least the next couple of months, so I continue to buy short-term dips for small moves.

Given enough time, I do think that once we get towards trading spring contracts, we will start to roll over yet again. In the short term though, with the increase demand and of course the bankruptcies that we have seen in this industry, it does make quite a bit of sense that we would go higher every opportunity that we get.

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

Natural Gas Price Fundamental Daily Forecast – Stronger Ahead of EIA Report on Jump in LNG Demand

Natural gas futures are trading higher on Thursday as traders position themselves ahead to the government’s weekly storage report, due to be released at 14:30 GMT. The rally is likely being fueled by the report or increased demand for liquefied natural gas since the weather forecasts are offer little support for prices.

At 11:47 GMT, December natural gas futures are trading $3.252, up $0.063 or +1.985.

Both the American and European models made sizeable warmer changes on Wednesday, according to Bespoke Weather Services. The American model, which had been much colder, lost even more demand in the latest run to better align with its European counterpart.

“Once again, the changes come thanks to a western shift regarding placement of the upcoming cold, resulting in much less impact in the key areas of the Midwest and East,” Bespoke said. “This now places the 15-day period as a whole back below normal rather easily.”

Bespoke’s forecast leans toward the European model, given the LaNina base state. The late-month pattern shows less potential for notable cold as well, according to the forecaster. This would align with its theory of a warmer start to November if it’s upheld.

“This is also consistent with what the climate models have been suggesting heading into November, having never wavered, at least so far.”

US Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) reports 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.”

Last year, the EIA recorded a 102 Bcf increase in storage for the similar week, and the five-year average stands at 87 Bcf. Total working gas in storage as of October 2 stood at 3,831 Bcf, which is 444 Bcf higher than last year at that time and 394 Bcf above the five-year average.

Daily Forecast

The early price action suggests traders are moving on from the short-term weather outlook and looking forward to an expected jump in LNG demand next month as curtailed supply returns to the market. Lingering above average temperatures could put a lid on prices, however. The best combination for the bulls will be cold temperatures and a surge in LNG demand.

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

Natural Gas Price Forecast – Gapped Lower as Hurricane Blows By

Natural gas markets have gapped lower to kick off the trading session on Wednesday as we have gotten past the hurricane in the Gulf of Mexico yet again. Having said that, there is still plenty of support underneath and I think that it is only a matter of time before we get buyers again. After all, the market is going to be looking at the natural gas markets through the prism of colder temperatures in the next few months, so I do think that it is only a matter of time before we get an opportunity to get long again.

NATGAS Video 15.10.20

Currently, the 50 day EMA is sitting at the $2.50 level, which of course is a psychologically important figure. I think at this point time, it is only a matter of time before we pull back and then find buyers yet again. In fact, we are already starting to see a little bit of a bounce near the $2.60 level. Given enough time, the $3.00 level above is a large, round, psychologically significant figure that will continue to cause issues. I do think that the market is very attracted to that level, and as we are trading the November contract people are starting to look at the idea of picking up value.

The next couple of months should feature cold weather that people will use to drive natural gas higher as is the cyclical trade. However, by the time we get into the early part of next year, we will be trading spring contracts, which of course will drive this pair right back down. In the short term, I like buying short-term pullbacks.

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

Natural Gas Price Fundamental Daily Forecast – Weakening as Models Show Some Lost Near-Term Demand

Natural gas futures are edging lower for a third session on Wednesday, a far cry from Monday’s gap higher opening. Uncertainty over the weather and increased production are exerting the most pressure on the market, while a mixed cash market is offering little support.

At 06:26 GMT, December natural gas is trading $3.186, down $0.061 or -1.88%.

Volatile Weather Models Driving the Price Action

The overnight models lost some of the projected demand for the next couple of weeks, with the Global Forecast System (GFS) giving back nearly 10 heating degree days (HDD) and the European model losing a few more HDD on top of the several it lost Monday, according to NatGasWeather.

However, the midday GFS gained much of that back and was once again notably colder than the European model, especially with a cold shot into the Midwest and Northeast during the October 21-25 period.

The European model showed a cool shot, but it was confined to the Rockies and Plains, the forecaster said. The East, meanwhile, is quite warm in what NatGasWeather called “a relatively bearish set up.”

These big weather model differences need resolving, according to the forecaster. “To our view, the GFS model is likely too cold, as it was in most instances last winter. But the European model is probably too warm after the coming Friday-Monday cold shot, so there’s potential it adds demand later.”

Gulf of Mexico Production Continues to Return

Natural Gas Intelligence (NGI) reported that based on offshore operator reports, the Bureau of Safety and Environmental Enforcement said around 30% of the natural gas and 44% of the oil produced in the Gulf of Mexico remained shut-in. All personnel from nondynamically positioned rigs in the Gulf of Mexico were back to work, and all the dynamically positioned rigs that had been moved off location ahead of the storm were back on location.

LNG Demand Firming

NGI reported that export demand remained strong Tuesday. NGI data showed feed gas deliveries to U.S. liquefied natural gas (LNG) terminals edging up about 44,000 Mcf to 7.08 Bcf, which is about 46,000 Mcf shy of week-ago feed gas levels.

Daily December Natural Gas

Daily Forecast

The daily chart indicates that prices are likely headed into a short-term retracement zone at $3.161 to $3.121. Trader reaction to this area could determine the near-term direction of the market.

“The issues moving forward will be the trends in the weather pattern, along with, of course, LNG volumes,” Bespoke Weather Services said. However, also of importance will be how much power burns change once this current heat in parts of the South, especially Texas, wanes late this week. “For now, we see risks near equal to upside/downside.”

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

Natural Gas Price Prediction – Prices Ease Despite Cold Weather Forecast

 

Natural Gas prices moved lower on Tuesday, easing after Monday’s rally. Prices declined by approximately 1.6%. Colder than normal weather continues to be forecasted to cover most of the mid-west of the US for the next 2-weeks increasing heating demand. There is one tropical storm headed to the Caribbean which has a 30% chance of turning into a tropical cyclone over the next 48-hours according to NOAA.

Technical Analysis

Natural gas prices eased losing 1.6%  after whipsawing on Monday. Support is seen near the 50-day moving average near 2.75. Resistance is seen near the September highs at 3. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. Short-term momentum has also turned positive as the fast stochastic continues to accelerate higher. The current reading on the fast stochastic is 81, above the overbought trigger level of 80 which could foreshadow a correction.

The Energy Information Administration Estimates a 12% increase in Inventories

EIA estimates that natural gas in storage ended September at more than 3.8 trillion cubic feet a 12% more than the five-year average. In the forecast, EIA expects inventories to be more than 4.0 Tcf on October 31, which would be a record high. However, because expected natural gas production will be lower this winter than last winter, EIA forecasts inventory draws will outpace the five-year average during the heating season and end March 2021 at 1.7 Tcf, which would be 6% lower than the 2016–20 average.

Natural Gas Price Forecast – Natural Gas Continue to Look Bullish

Natural gas markets have fallen a bit during the trading session on Tuesday, as we have seen a bit of profit-taking. That being said, we reached down to fill the gap from the Monday open, and have turned around to show signs of life again. Ultimately, this is a market that I think will continue to find buyers, based upon the hurricane fears and of course the fact that we are trading the November front contract. This means that there should be more demand, and therefore it is difficult to imagine a scenario where natural gas falls for a significant amount of time. That being said, it does not have to go straight up in the air, so I like buying dips and simply collecting profits as they occur.

NATGAS Video 14.10.20

To the upside, I believe that the $3.00 level will continue to be important, as it is a large, round, psychologically significant figure, and of course will attract a lot of attention. With that being said, the market is likely to continue to struggle to get above there, but once it does it will be a bit of a “beach ball underwater scenario”, meaning that we will probably shoot up in the air rather quickly. Because of this, I am not interested in shorting this market anytime soon, at least not until we start to trade the spring contracts. That is several months away, so at this point I am a buyer only. Do not get me wrong, I do not necessarily say we cannot pullback, but look at that as potential value this time of year.

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

Natural Gas Price Fundamental Daily Forecast – Supported by LNG Demand, Capped by Easing Weather Forecasts

Natural gas futures are edging lower early Tuesday as a forecast change to milder-trending temperatures is weighing on demand. Prices moved higher early Monday as damage from Hurricane Delta over the weekend to liquefied natural gas (LNG) production facilities appeared to be minimal and forecasts called for temperatures moving in a colder direction. However, those gains were erased when new forecasts took out the cold and introduced warmer temperatures.

At 13:54 GMT, December natural gas is trading $3.224, down 0.047 or -1.44%.

Projected temperatures remain colder-than-normal for the period running Friday through October 22, but “this morning’s forecast, like yesterday afternoon’s modeling runs,” reduces gas-weighted heating demand in the outlook, the EBW analysts said.

Short-Term Weather Outlook

According to NatGasWeather for October 13 to October 19, “The northern U.S. will be mild with highs of 50s and 60s due to weather systems over the Northwest and Northeast. The Northwest system will track into the Midwest Wednesday where it will tap colder air to drop lows into the 20s and 30s. The rest of the U.S. will be comfortable to warm with highs of 70s and 80s besides hotter 90s over areas of California and the Southwest. A stronger cold shot will push into the Midwest and east-central U.S. late this week into next week with rain, snow, and chilly lows of teens to 40s for stronger national demand. Overall, national demand will be low through Thursday then increasing to high.”

IEA – Response to COVID-19 Crisis to Reshape Global Energy

Amid the deep demand destruction and uncertainty caused by the coronavirus pandemic, global energy demand is set to drop by 5% in 2020, with oil and gas investments falling by an estimated 18%, and the pain could linger into 2023 depending on whether the virus is controlled, according to the International Energy Agency (IEA).

Daily Forecast

We could see a choppy trade on Tuesday ahead of the midday weather reports. Additionally, differences in the U.S. and European weather models could also be the source of volatility. We may not see a solid trend develop in the market until the weather models align. Meanwhile, the market is likely to be supported by rising demand for LNG exports.

However, we may not see a breakout to the upside unless a combination of heating demand and LNG demand can make storage concerns go away.

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

Forget Peak Oil Demand, Supply Crisis Could be Hitting First

In today’s IEA’s annual World Energy Outlook 2020 report, the OECD energy watchdog states that it doesn’t see a peak oil demand before 2040, only a possible oil demand flattening. The energy agency repeats that oil demand is effected by COVID, but all scenarios show that oil demand has not peaked yet. The energy agency contradicts here the views currently being proponed by BP and others that oil demand has peaked already. The report bluntly states that after recovering from the “exceptional ferocity” of the COVID-19 crisis, world oil demand will rise from 97.9 million bpd in 2019 to 104.1 million bpd in 2040.

Even that the agency acknowledges that demand has been hit and is lagging behind 2019 levels, overall demand will increase, only the increase will be slightly slower than expected. The Paris-based agency, financed by the OECD governments, and lately known as a main proponent of energy transition and renewables, expects that a slower increase of oil demand the coming years will be caused by clean transport policies and surging renewable energy. At the same time the IEA also reiterates that demand for petrochemicals and global growth of long-distance transport will be leading to a net increase of oil demand until 2040.

It needs to be reiterated that several major factors are very unsure that could have a major impact on global oil demand growth. The current assessments are all taking into account a wide range of proposed and/or signed energy transition and net-zero emission government policies.

These will have an impact if fully implemented by all. Looking at the current situation, especially due to COVID-related economic issues, renewable and emission reduction policies could however become sidelined, delayed or put on ice. The need for a revamp of the global economies is clear, but choices will be made by respective constituencies without full focus on climate change and renewables.

At the same time, the major future driver for oil and gas demand will be policies implemented by emerging markets. China, India and Middle Eastern countries will become much more important than is currently taken into account in several scenarios. A post-COVID economic planning will have to make choices on where to invest and how to progress. Renewables and climate-related investments could be too expensive to materialize.

Even within the OECD countries itself, high-flying plans such as the EU Green Deal or Net-Zero policies of major industries will have to tackle the call for a stable economic recovery from citizens (voters). The IEA, supported by a report of OPEC several days ago, expects that due to a post-Corona global economic rebound oil demand will be pushed back soon to pre-crisis levels of close to 100 million bpd.

The media will be focusing today largely on the peak oil demand issues, as this is being pushed forward. The discussion however seems to forget that global oil demand is very flexible, and expected to recover quickly, but oil supply is heading towards a crisis. If demand for oil is recovering, the market will be soon facing supply issues.

The latter not due to geopolitical risks, chokepoint closures or a Greek-Turkish war, but simply by a lack of new oil projects being started and hitting the market to counter demand recovery and the production decline of existing production fields. Without more attention for hard-needed investments influx in upstream projects worldwide, markets could be facing a slow but steady decline in supply.

The ongoing onslaught on IOCs and independents by activist shareholders and institutional investors to head for a Net-Zero emission production or even leaving oil and gas totally is resulting in a hidden disaster for the global economy. Demand is going to recover, levels will be reaching at least 5-10 million bpd above 2019 levels by 2030, possibly hitting 115-120 million bpd by 2040. Between 2020-2030 latter extra volumes needed is twice the Saudi Al Ghawar field production.

Where most analysis in the media really goes wrong is that it only looks at demand increase. The main issue at present to deal with is to assess the normal decline of producing fields globally. If taking a very conservative approach of 7% decline per year, we are looking at extra production to be found of 6-7 million bpd to counter yearly decline overall. Putting this in place for the period 2020-2025 we are talking about new production to come onstream of 25-30 million bpd at least.

Without investing in existing and future production, oil storage volumes worldwide will crash, showing empty barrels or tanks very soon. By repeating peak oil demand scenarios and reports, the media and financial analysts are creating a lack of urgency that will bite the hands it feeds. Maybe the IEA assessments will need to some new rational analysis than we have seen before.

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