Natural Gas Price Fundamental Daily Forecast – Consolidating at 19-Month Low Despite Less Cold Forecasts

Natural gas futures are inching higher in a lackluster trade early Monday just one session after hitting a 19-month low. The price action suggests traders are responding to oversold technical conditions or a slight change in the weather forecast over the weekend.

Prices fell 3% on Friday after a fresh two-week forecast called for less-cold weather and lower heating demand than previously expected. This should allow utilities to pull less gas from storage than usual for at least a third week in a row.

At 10:40 GMT, March natural gas futures are trading $3.145, up $0.109 or +3.59%. On Friday, the United States Natural Gas Fund ETF (UNG) settled at $10.25, down $0.26 or -2.47%.

Another Freeport LNG Delay

Advances were also capped by more pessimism over Freeport LNG with traders now believing that the liquefied natural gas (LNG) export plant in Texas would not return to service until February or later after another vessel turned away from the plant next week.

Freeport LNG has said the plant is on track in the second half of January, pending regulatory approvals, according to Reuters.

Prices could stabilize enough to stop the current slide once Freeport returns to service after shutting down in June due to a fire. When operating at full power, the facility can pull in around 2.1 billion cubic feet per day (bcfd) of gas and turn it into LNG about 2% of U.S. daily production, according to Reuters.

US Stockpiles Surplus Returns and Could Get Larger

The U.S. Energy Information Administration (EIA) reported last Thursday that domestic natural gas supplies fell by 82 billion cubic feet (Bcf) for the week ended Jan. 13. That compared with expectations for a decline of 72 Bcf, according to the average forecast of analysts, brokers and traders surveyed by The Wall Street Journal.

Total working gas stocks in storage stand at 2.820 trillion cubic feet, down 19 billion cubic feet from a year ago, but 34 billion cubic feet above the five-year average, the government said.

Short-Term Outlook

At the start of the new week, the fundamentals are still bearish with U.S. gas stockpiles about 1% above the five-year (2018-2022) average for this time of year. Analysts expect that will rise to about 5% above normal after this week.

The weather situation is expected to be murky over the next 4-days, the market could see light to moderate national demand over this time period before increasing to stronger levels late this week as cold over the central U.S. spreads into the East.

“However, the GFS model remains notably colder than the EC for Jan 28-Feb 2 as the EC doesn’t see as great of coverage of subfreezing temperatures,” according to NatGasWeather.

In another sign of fading hopes that extreme cold will eventually supercharge gas prices this winter, the premium on March futures over April, which the industry calls the widow maker, fell to a record low of zero.