Natural Gas Price Fundamental Daily Forecast – Bullish Tone Amid Tight Supply/Demand Balances

Natural gas prices are edging higher on Tuesday on the back of robust demand for U.S. liquefied natural gas (LNG) and growing concerns over the storage deficit ahead of the summer cooling season.

Traders are also bracing for heightened volatility ahead of the expiration of the June futures contract. All of this is driving prices to their highest level since May 6, increasing the possibility of a breakout to the upside.

At 12:43 GMT, July natural gas futures are trading $8.859, up $0.032 or +0.36%. On Monday, the United States Natural Gas Fund ETF (UNG) settled at $30.05, up $2.32 or +8.37%.

Robust LNG Exports Approaching Eight Week High

U.S. exports of liquefied natural gas (LNG) on Monday climbed further above the 13 Bcf threshold after nudging through this level on Friday.

After a lull in LNG feed gas volumes due to spring maintenance work at export facilities, exporters are ramping up activity with a goal of reaching new records over 14-plus Bcf. This was the area reached earlier in the year at the height of robust European demand.

Short-Term Weather Outlook

According to NatGasWeather for May 24-20, “A cooler than normal weather system with heavy showers and thunderstorms will track across the Plains and east-central US the next few days with lows of upper 30s to 50s, highs of 50s to 70s, including cooling Texas and the south into the more comfortable 70s and 80s.

Hot conditions are now confined to the Southwest, California, and parts of Florida with highs into the 90s. The southern and eastern US will warm into the 80s and 90s this weekend for a full swing back to stronger national demand after being light during the work week.”

Weekly Storage Report Leaning toward Bullish Side

Bespoke Weather Services said its expectations for this week’s Energy Information Administration (EIA) storage report are for a print that would imply “wildly tight supply/demand balances.”

Furthermore, “we currently show the next four numbers coming in under the five-year average build, something that is not sustainable without ultimately driving prices higher until we can price out some demand,” Bespoke added.

The firm said it estimated a storage build of 80 Bcf for the week ended May 20. That would compare with an injection of 109 Bcf during the same week last year and a five-year average injection of 97 Bcf.

Daily Forecast

Traders are reacting to the test of the 14-year high at $9.052 the way they should at this time of the year, with tentativeness. Bullish traders know that time is on their side and would much rather accumulate as many long positions as affordable on price breaks rather than chasing price higher.

The set-up is there for an expansion of the rally but the market needs one more spark to trigger a solid breakout. Production is low, LNG exports robust, but the weather is still “comfortable”. Add a little heat the first week in June and prices could soar towards $10.