Natural Gas Price Fundamental Daily Forecast – Cooler Shift in Weather Pattern Could Dampen EIA Impact

Natural gas futures are inching higher on Thursday shortly after the regular session opening and before the release of the latest weekly government storage report at 14:30 GMT. The early price action has the market hovering just below the multi-week high reached the previous session.

A favorable weather forecast, lower production and potentially low storage ahead of the winter heating season are three reasons for the current bullish outlook.

However, early Thursday, some of the steam has been removed from the market after overnight weather models showed slightly less heat in mid-August. Natural gas traders are also a little nervous ahead of the government report because of the lack of clarity over the size of the expected injection. Both factors could prove to be the recipe for heightened volatility.

At 13:47 GMT, September natural gas futures are trading $4.186, up 0.028 or +0.65%. This is up from an early intraday low of $4.116.

Overnight Weather Forecasts Show Slightly Less Heat

Despite the loss of 2-3 cooling degree days from the long-range outlook, next week is still expected to bring the hottest weather of the summer. However, the sweltering outlook for the eastern half of the country is now expected to ease a bit by August 16, Natural Gas Intelligence (NGI) reported.

NatGasWeather said for August 5-11, “National demand will be moderate through Friday as a cool shot lingers across the Great Lakes and Northeast the U.S. with highs of 70s to 80s. The West, Texas, and Plains will be very warm to hot with highs of upper 80s to 110s as upper high pressure rules, hottest in California and the Southwest.

Temperatures will increase across the East this weekend and next week as strong upper high pressure brings highs of 90s, while also hot with highs of mid-90s to 100s over Texas and the South for high to very high national demand.

Overall, moderate national demand through Friday, then increasing to high this weekend and high to very high next week.”

Energy Information Administration Weekly Storage Report

Ahead of today’s weekly storage report, analysts and market observers did not appear to have a firm grasp on the size of the injection that may be reported by the Energy Information Administration (EIA), NGI reported.

According to NGI, a Wall Street Journal poll produced estimates ranging from an increase of 14 Bcf to as much as 34 Bcf. Reuters polled 17 analysts, whose estimates were in the same range with a median injection of 21 Bcf. A survey by Bloomberg had a median injection of 18 Bcf, and NGI modeled a 17 Bcf build.

This would compare with last year’s 32 Bcf infection and the 30 Bcf five-year average build, according to the EIA.

Daily Forecast

With traders starting to price in a less-bullish weather outlook, today’s EIA report has come in near the 17 to 14 Bcf area to spike prices higher. Nonetheless, even with a bullish EIA report, traders have to be prepared for a volatile reversal to the downside late in the session. Despite yesterday’s rally, the price action doesn’t appear to be supported by extremely strong buyers.