Natural Gas Price Fundamental Daily Forecast – Colder/Higher Demand Risks Could Underpin Prices

Natural gas futures are edging lower early Monday as investors continue to digest the second consecutive larger-than-expected weekly government storage report and short-term forecasts pointing toward lower demand. However, traders are starting to watch the 11- to 15-day period, which is helping to dampen the bearish outlook.

Bespoke Weather Services said on Friday, “Models showed hints that another push of colder air could come into the eastern United States at the end of the 11- to 15-day period, preventing the outlook from being bearish.”

“At this time, we are not expecting to see demand rise to the same levels as we saw starting in the middle of October last year,” Bespoke chief meteorologist Brian Lovern said.

NatGasWeather added, “The data is struggling with exactly how much cold air will arrive with this system, but the data has added demand since the start of the week.”

At 09:06 GMT, November natural gas futures are trading $2.314, down $0.038 or -1.62%.

U.S. Energy Information Administration Weekly Storage Report

On Thursday, the EIA reported a 112 Bcf injection into storage inventories for the week-ending September 27.

Last year, the EIA reported a 91 Bcf injection, and the five-year average stands at 83 Bcf.

Total stocks now stand at 3.317 trillion cubic feet, up 465 billion cubic feet from a year ago, but 18 billion below the five-year average, the government said.

Short-Term Weather Outlook (7 Day)

According to NatGasWeather for October 4 to October 10, “Strong high pressure will dominate the South & East into Saturday with highs of 80s to lower 90s for strong late season demand. Mild to chilly conditions continue across the northern US with lows dropping into the 20s to 40s for modest early season heating demand. Fresh cooling will spread across the Midwest and Northeast early next week with lows of upper 30s to 40s. Across the southern US, high pressure will ease late in the weekend through next week with mostly comfortable highs of 70s and 80s besides the hotter Southwest. Overall, demand will be dropping to moderate-low late this weekend through next week.”

Daily Forecast

We should know how traders feel about the introduction of cold weather into the  11 -15 day forecast by their reaction to the minor 50% level.

The minor range is $2.207 to $2.398. Its 50% level at $2.302 is the key level to watch this week.

If aggressive counter-trend buyers come in on a test of $2.302 this week then this will indicate they are increasing bets for the return of cold weather to trigger a jump in demand.

A sustained move under $2.302, however, will suggest they are downplaying the weather forecasts.

Don’t be surprised if the market trades both sides of $2.302 as traders work out the details of the 11 to 15 day forecast.