Natural Gas Fundamental Analysis – week of September 12, 2016 – Forecast

Natural Gas traders started to prepare for the in between season as summer ends and winter is months away. NG is trading 2.795 and is expected to hold flat this week. The commodity dipped 0.39% as the strength of the US dollar weighed on the energy product.

U.S. gas production is declining and shale gas output is down almost 2.5 Bcf per day. Production is decreasing while consumption and exports are both increasing. EIA data indicates a supply deficit by the end of 2016. Henry Hub spot prices have doubled since early March. Will companies show discipline to preserve higher prices?

Not a chance. They will drill more wells if investors continue to provide capital. This, however, will probably be too little too late to stop the decline in gas production that is already underway.

Gas traders compare the current year’s evolving inventory level with that of previous years to determine if storage will be adequate to meet winter demand. If the rate of inventory buildup is judged to be ahead of expected winter demand, the price of futures contracts decreases. If that rate is deemed questionable to meet winter demand, the price of those contracts increases. Producer response to price signals is typically delayed until a price trend emerges to justify increased or decreased drilling. The potential for over-shoot and under-shoot is great.

Comparative inventory is, therefore, the best measure of the disequilibrium in the seasonal supply chain. It effectively removes the seasonal effects of energy use and plant maintenance that sometimes confuse the interpretation of absolute inventory levels

Week of September 12^th:  High pressure will dominate the southern and eastern US with very warm temperatures of upper 80s to mid-90s, including across major cities such as Washington D.C. and NYC. Showers and cooler temperatures over the northern Rockies will spread across the Plains Great Lakes, and Mid-Atlantic in the days ahead with highs of only 60s and 70s. Over the West, warm temperatures will build in the wake of departing weather systems, including a weakening once tropical system over the SW. Most importantly, with warm upper level high pressure over the East and Southeast, nat gas demand will remain stronger than normal into early next week and at HIGH levels.

FxEmpire provides a wide variety of analysis on a daily, weekly and monthly basis ranging from our exceptional technical analysis as well as our in-depth fundamental analysis along with our daily news and market updates. To get the best understanding of each asset it is important to review the short term daily analysis with the longer term monthly reports. To get email notification when each of these are posted please sign up for our daily newsletter.

Economic Events: (GMT)

WEEKLY

Natural Gas Weekly Update
Release Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)

Weekly Natural Gas Storage Report
Release Schedule: Thursday at 10:30 (Eastern Time) (schedule)