Natural Gas Price Fundamental Daily Forecast – Demand Destruction Weighs on Nearby Futures

Natural gas prices are trading lower after posting a dramatic technical closing price reversal top the previous session. The move came as a surprise to small speculators, who were banking on the plunge in crude oil prices to lead to lower production in natural gas. They aren’t wrong, per se, but their timing is off. The price action in the deferred futures contract indicates that the drop in production is more likely to have a bullish impact next winter than over the short-run.

At 11:43 GMT, June natural gas futures are trading $1.943, down $0.041 or -2.07%.

After Tuesday’s volatile price swings, Bespoke Weather Services said the look of the futures curve makes a bit “more sense” now, since demand destruction from the coronavirus pandemic is still ongoing.

“The real bullishness in the natural gas market should be later, which is now how things are priced. That said, this market is likely to be volatile, and there will be more moves that may not make sense given the actual data,’ Bespoke said.

Short-Term Weather Outlook

According to NatGasWeather for April 22 to April 28, “Weak cool shots will continue across the Great Lakes and Northeast into next week with slightly chilly lows of 20s to lower 40s. The southern US will be warm to very warm with highs of 70s and 80s, locally 90s. A warm weather system will bring showers to the South-Central Plains today, with a second cooler one into the Northwest with highs of 50s to 60s. The nation’s hot spot will be the Southwest where highs will reach the 80s to 100s. Overall, moderate national demand.”

Daily Forecast

Looking ahead to Thursday’s U.S. Energy Information Administration (EIA) weekly storage report, analysts are projecting a build somewhere in the 40 Bcf range, which would come in far below the year-ago injection and thus provide “a material reduction” in the year/year storage surplus, according to Mobius Risk Group.

Furthermore, daily data for the current week, which is to be reflected in the April 30 EIA report, indicates a “very low risk” of topping triple-digits and a possibility that the build would be less than 75 Bcf.

While there are still a few milder days left in the week that could alter the projection, “considering the comparable week last year saw an injection of 114 Bcf, there should be consecutive storage surplus reductions,” Mobius said.

Based on this assessment, Thursday’s report could come in on the bullish side.