Natural Gas Price Fundamental Daily Forecast – Demand Destruction Offsetting Production Losses

Natural gas futures are trading lower late in the session on Wednesday. Even though Hurricane Laura has been upgraded to Category 4, traders seem unfazed about any potential damage to infrastructure, but are genuinely concerned about lower demand.

According to Natural Gas Intelligence (NGI), spot gas prices also softened due to increasing cloud cover along the Gulf Coast, as well as lower liquefied natural gas (LNG) demand from Gulf Coast facilities. NGI’s Spot Gas National Average fell 5.0 cents to $2.310.

At 18:00 GMT, October natural gas futures are trading $2.580, down $0.016 or -0.62%.

Weather and Lower LNG Demand

“LNG cargoes in and out of the Gulf have already ceased and will likely lead to a drop of LNG feed gas from 5.1 Bcf Monday to 3-4 Bcf in the day ahead,” said NatGasWeather.

“Essentially, while production losses will be near to slightly greater than 2 Bcf/d, LNG feed gas and demand destruction from clouds, rain, cooling and power outages are likely to offset, NatGasWeather wrote.

NGI added that Mobius Risk Group pointed out that considering the September contract expires on Thursday, and market expectations call for a sizable increase in LNG feed gas demand in September, such disruptions to supply and demand “may cause confusion regarding the fair value for methane molecules” next month. Adding to this challenge are large swings in downstream markets in Europe and Asia, the firm said.

Short-Term Outlook

Thursday’s September futures contract expiration could cause whip saw price action due to the hurricane and the release of the U.S. Energy Information Administration (EIA) weekly storage report.

Once Hurricane Laura passes, the weather will jump to the front and center with cooler outlooks not boding well for bullish traders. In fact, when combined with the loss of demand from the storm, prices could even drop sharply.

NatGasWeather sees, “The Southern United States and up the East Coast still very warm, but national demand won’t be as strong with the northern and central U.S. mostly comfortable.”