Natural Gas Price Fundamental Daily Forecast – Bearish Data Points Combined with EIA Miss Weighing on Prices

Natural gas futures are trading lower at the mid-session, putting a bearish spin on what began as a very promising week. There was a bearish tone at the start of Friday’s session amid no major changes in the month-end weather forecasts and yesterday’s bearish miss in the weekly government storage report.

At 17:09 GMT, July natural gas futures are trading $2.980, down $0.011 or -0.37%.

Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 71 billion cubic feet (Bcf) for the week ended May 14. That was larger than the average increase of 63 Bcf.

Ahead of the EIA report projections called for a relatively light increase in storage because of cool weather that lingered across the Midwest and East last week. That drove heating demand in those regions, along with strong LNG demand in the South Central region, according to NGI.

While NGI’s model called for a 63 Bcf injection, Bloomberg’s estimates showed a median of 59 Bcf. Reuters guesses called for a median build of 59 Bcf and a Wall Street Journal survey landed at an average build of 61 Bcf.

According to the EIA, total stocks now stand at 2.1 trillion cubic feet (Tcf), down 391 Bcf from a year ago and 87 Bcf below the five-year average.

Short-Term Weather Outlook

According to NatGasWeather for May 21-27, “Several weather systems will bring areas of showers to the Mountain West, Midwest, and South with highs of 50s to 80s, coolest in the Northern Rockies. Most of the rest of the U.S. will also experience pleasant temperatures with highs of 60s to 80s for light national demand through Saturday.

National demand will increase late this weekend through mid-next week as very warm highs of 80s to 90s sets up over the East, with the hottest in the Southeast, although it would be more impressive if not for comfortable highs of 60s-80s most elsewhere besides, the hotter 90s in the Southwest deserts.

Overall, low national demand through Saturday, then moderate Sunday-Wednesday.

Daily Outlook

Without any major heat in key demand areas in the country, we’re likely to see lower prices over the short-run.

The main range on the daily chart is formed by the March bottom at $2.585 and the May top at $3.024. This makes its 50% to 61.8% retracement zone at $2.895 to $2.822 the next likely downside target.

Bespoke Weather Services sees no help coming from data points on production, exports and power burns, so when combined with the EIA miss, the fundamentals are looking “weaker than we have seen for several weeks” Friday, according to the firm.

“We likely need the modeled heat to show up in order to avoid a move lower that could possibly take out the $2.90 support level,” Bespoke said. “…As long as heat sticks around, it is more difficult to argue much downside, unless we see further loosening in the supply/demand balance.”