Natural Gas Price Fundamental Daily Forecast – Dec Futures Contract Could Attract Buyers at $3.197 to $3.187
Natural gas futures are edging lower on Tuesday as a milder weather forecast and a mixed outlook for export demand of liquefied natural gas (LNG) continued to cap gains. Although the market is trading lower, it is above yesterday’s low suggesting the sell-off may have been related to the expiration of the October futures contract.
At 11:09 GMT, December natural gas futures are trading $3.229, down $0.042 or -1.28%.
As suspected, weather-driven demand expectations decreased over the weekend, driven by warmer changes to the pre-weekend forecast that would trim heating degree days (HDD) over the northern part of the country, according to Bespoke Weather Services.
“We do still have a healthy cool shot this week, relative to time of year, but while there are some HDDs in the north, we must also consider the total lack of demand in the South this week, as the cooler air” reduces cooling demand, Bespoke said.
Short-Term Weather Outlook
According to NatGasWeather for September 29 to October 5, “A cool front with showers will track into the east-central U.S. today with highs of 50s and 60s. Comfortable highs of 70s and 80s will rule the East Coast ahead of this system, then cooling into the 60s and 70s Wednesday. The West will be warm to hot with highs of 80s and 90s, locally 100s. California and Southwest. A stronger cold shot will push into the Great Lakes and East Thursday through Sunday with lows of 30s & 40s, locally 20s, for stronger demand. Overall, national demand will be moderate to low, then increasing to high late in the week.”
EBW Sees Shifts in Production and LNG Demand
“While Cameron has started to receive trace amounts of natural gas, both Cameron and Cove Point are still shut down, feed gas flows at Sabine Press have been reduced due to pipeline maintenance, and natural gas production has rebounded modestly,” the EBW analysts said. “By later this week, however, demand is likely to increase due to colder weather and increased LNG feed gas flows,” potentially pushing prices higher.”
With the October futures contract off the board, the November futures contract is likely to inherit its bearish tone.
“Once the smoke clears, with demand generally looking weak, and the risk of cash also staying weak with storage still at record levels,” the November contract “faces downside price risks as it becomes the new prompt month,” Bespoke said. “…Fundamentally, the picture for winter still looks bullish, however, but we will soon have to consider weather as well, which may not be very helpful to bulls over the next several weeks.”
Our work suggests the December contract may continue to probe potential support zones at $3.222 to $3.187 and $3.197 and $3.156. We think these areas represent value so we expect buyers to come in today or later in the week, especially with colder weather coming. The sweet spot on the charts is $3.197 to $3.187.
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