Natural Gas Price Fundamental Daily Forecast – ‘Bearish Surprise’ Fears Ahead of Weekly EIA Storage Report

Natural gas futures are trading nearly flat shortly before the New York opening and well ahead of the release of the weekly government storage report at 14:30 GMT. After reaching its highest level since February 22 on Tuesday, gains have been capped by expectations from a more substantial build in underground inventories.

At 11:31 GMT, June natural gas futures are trading $2.945, up $0.007 or +0.24%.

Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) is reporting that traders are expecting today’s EIA report to show a storage injection for the week ended April 30 that could be more than four times greater than the prior week.

NGI also reported that a Bloomberg survey Wednesday showed a median estimate for a 66 Bcf injection, with predictions ranging from 49 Bcf to 76 Bcf. Estimates generated by a Reuters poll spanned increases of 49 Bcf to 76 Bcf, with a median of 65 Bcf. The Wall Street Journal’s weekly survey showed estimates ranging from increase of 52 Bcf to 70 Bcf, with an average of 62 Bcf.

NGI’s model predicted a 76 Bcf build.

Median estimates for the April 30 week, while much higher, still compare favorably to recent history. The EIA recorded a 103 Bcf build in the comparable week of 2020, while the five-year average injection is 81 Bcf, according to NGI.

If you recall, last week’s EIA report showed a 15 Bcf injection for the week ended April 23. That was well below normal for this time of year, leaving U.S. inventories at 1,898 Bcf – 302 Bcf lower than a year earlier and 40 Bcf below the five-year average.

After initially falling on the news last Thursday, prices rose on Monday in a delayed reaction to the news.

Short-Term Weather Outlook

According to NatGasWeather for the week-ending May 6 to May 12, “Weather systems and associated cool shots with showers and thunderstorms will continue across the Midwest and Northeast through next week with highs of 50s and 60s and lows of 30s and 40s. Cooling has also arrived into the South/Southeast with highs of 70s to low 80s for lighter demand, although warming back into the 80s and 90s from Texas to the Southeast late this weekend. The West will experience showers and cooling over the Northwest in the coming days with highs of 50s and 60s but very warm over the Southwest with highs of 80s to 90s. Overall, moderate the rest of the week.”

Daily Forecast

Traders are taking no chances ahead of this week’s EIA report, essentially moving to the sidelines ahead of the numbers.

A neutral report would actually compare favorably to historic norms, but the move to the sidelines suggests traders are erring on the side of caution because of the possibility of a bearish surprise.

A bullish report could trigger a retest of this week’s high at $3.001, setting up the possibility of a breakout rally. A bearish report could drive prices back toward the upper level of a support zone at $2.868.