Natural Gas Price Fundamental Daily Forecast – Bears Expecting Oversized Storage Injection This Week

U.S. natural gas futures are trading lower on Monday, pressured by record production and short-term forecasts calling for lessening demand. The domestic markets are also being pressured by an extended fall in Dutch gas prices from the previous week as European gas storage continued to fill with Norwegian gas flows set to pick up.

At 11:36 GMT, November natural gas futures are trading $7.469, down $0.342 or -4.38%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $26.94, down $1.72 or -6.00%.

Friday Recap

November natural gas dropped 6.70% to its lowest level since July 20 with output holding near a monthly record as global gas prices slumped. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.0 bcfd so far in September from a record 98.0 bcfd in August.

Demand was expected to fall also with the coming of cooler autumn weather and the shutdown of another liquefied natural gas (LNG) facility.

Refinitiv projected average U.S. gas demand, including exports, would slip from 93.1 bcfd this week to 92.5 bcfd for the next two weeks. Meanwhile, demand is expected to decline further when the Cove Point LNG plant in Maryland shuts for a couple weeks of maintenance in October. This is on top of the existing shutdown at the second-biggest U.S. LNG export plant at Freeport LNG.

Traders Continue to Digest Bearish Storage News

The U.S. Energy Information Administration reported last Thursday that domestic natural-gas supplies rose by 77 billion cubic feet for the week-ended September 9. That compared with the average analyst forecast for an increase of 69 billion cubic feet, based on a survey conducted by S&P Global Commodity Insights.

Total working gas stocks in storage stand at 2.771 trillion cubic feet, down 223 billion cubic feet from a year ago and 354 billion cubic feet below the five-year average, the government said.

The report indicated the trajectory of supply starting to outstrip demand. Adjusting for weather, the market was 1.4 Bcf/d oversupplied during the latest EIA report period, versus a 0.4 Bcf/d undersupply in the prior week, according to Tudor, Pickering, Holt & Co. (TPH) estimates.

Recent data shows production growth outpacing TPH modeling, driven by higher volumes from the Haynesville Shale, the Eagle Ford Shale and the Anadarko, Natural Gas Intelligence (NGI) noted.

Short-Term Outlook

We’re looking for the downside bias to continue due to the combination of approaching cooler weather, higher production and more natural gas to consume domestically amid export outages that could lead to oversized storage injections in coming weeks.

NGI reported on Friday that an early look at this week’s EIA storage report, covering the Sept. 16 week, showed injections of 73 Bcf to 102 Bcf, with a mean increase of 83 Bcf, or slightly better than the five-year-average of 81 Bcf. This was based on a Reuters survey.