Natural Gas Price Fundamental Daily Forecast – Breakout Rally Fueled by Production Shut-ins from Hurricane Ida

Natural gas futures are spiking higher at the mid-session on Wednesday on fears that the production shut-ins caused by Hurricane Ida will lead to even lower supply heading into the winter heating season. This comes on top of especially strong price movement in August.

Last month ended with natural gas sitting at its best level since December 2018 after the futures contract recorded its fifth consecutive month of gains in response to lowered production forecasts.

“The production numbers are still very low, and at these levels, it is hard for prices to fall much, and they have plenty of room to go up,” said John Abeln, an analyst at Refinitiv.

At 15:46 GMT, October natural gas futures are trading $4.607, up $0.230 or +5.25%.

Dire Production Forecasts Underpinning Prices

U.S. production is forecast to dip to 89.4 billion cubic feet per day (bcfd) this week from 92.5 bcfd last week.

In August, “production numbers were higher, but demand numbers were up even higher. High international gas prices should continue to support that,” said Robert DiDona of Energy Ventures Analysis.

Data provider Refinitiv said total U.S. production has averaged 91.7 bcfd so far in August, versus 91.6 bcfd in July. That compares with an all-time monthly high of 95.4 bcfd in November 2019. That compares with an all-time monthly high of 95.4 bcfd in November 2019.

Short-Term Outlook

Bullish indicators abound at this time according to analysts at EBW Analytics Group.

“It also is becoming more apparent that much of the production in the Gulf of Mexico could be shut in for all or most of September due to power outages and severe damage at Port Fourchon,” the analysts said.

Furthermore, “While lost production is likely to be largely offset by losses in demand, the prospect of a prolonged production shut-down could have a major bullish impact on the gas market,” the analysts said.

It looks as if the winter heating season is poised to start with a bang due to the depletion of supply. Be prepared for fireworks if there is an early cold spell. However, we’re not likely to see anything like it until at least October.