Natural Gas Price Fundamental Daily Forecast – Cold Temps, Solid LNG Demand Driving Prices Higher

Natural gas prices are edging higher on Wednesday on forecasts calling for colder temperatures in early January and surging demand for U.S. liquefied natural gas due to rising prices in Europe.

At 14:11 GMT, March natural gas futures are trading $3.750, up $0.106 or +2.91%.

Short-Term Weather Outlook:  Light Demand

According to NatGasWeather for December 22-28, “National demand will remain light the next 7-days as high pressure strengthens over most of the central, southern, and eastern U.S. with highs of 50s to 70s.

Colder exceptions will be across the West and Northern Plains as chilly weather systems bring rain, snow, and frosty lows of -10s to 30s, highs of 0s-40s. Overall, national demand will be low the next 7-days.”

Intermediate Weather Outlook: Increasing Demand

While weather patterns through this week are not expected to drive widespread heating needs, the demand picture could brighten in early January, NatGasWeather said.

Natural Gas Intelligence (NGI) said both the American and European weather models trended warmer overnight into Tuesday, showing milder conditions over northern portions of the country for this weekend and into next week, the firm said. However, the models “both continue to forecast a rather chilly U.S. pattern January 1-5.”

There “will continue to be bouts of cold air across the West and northern Plains the rest of the month,” but they are not expected to advance “aggressively south or eastward,” NatGasWeather added. That noted, “cold air over the northern Plains is still expected to spread across the rest of the Midwest January 1-5, as well as down the Plains and across the Northeast.”

Early Look at Energy Information Administration Weekly Storage Report

Looking ahead to this week’s EIA storage report, Natural Gas Intelligence’s (NGI) learning machine is forecasting a much lighter-than-average 53 Bcf withdrawal for the week-ended December 17. Energy Aspects is predicting a 59 Bcf withdrawal.

Last year, the EIA recorded a 147 Bcf withdrawal for the similar week, while the five-year average is a pull of 153 Bcf.

Daily Forecast

We expect to see some light short-covering over the near-term as long as the forecasts continue to call for colder temperatures January 1 -5. Prices could drop rather quickly, however, if a new forecast calls for lower demand during this period.

In other news, NGI estimates showed that LNG feed gas volumes reached a new high of 13.1 Bcf/d on Sunday and held near that level on Monday and Tuesday.

The combination of strong LNG exports and rising heating demand should be enough to underpin prices, but don’t expect the rally to last too long unless a lingering cold pressure dome develops behind January 5.