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Natural Gas Price Fundamental Daily Forecast – Down Sharply on Bearish Weather Outlook, EIA Injection Estimate

By:
James Hyerczyk
Published: Nov 16, 2020, 14:30 UTC

Weather data was “decidedly” bearish trending over the weekend, with forecast demand dropping compared to Friday’s expectations, according to Bespoke.

Natural Gas

Natural gas futures gapped lower on Monday and the selling intensified after the regular session opening, driving the market through the November 9 main bottom at $2.965 and putting the July 20 bottom at $2.785 in clear view of sellers. The price plunge came as the latest forecasts lowered weather-driven heating demand expectations and signaled that mild temperatures could reach into early December.

At 14:10 GMT, January natural gas futures are trading $2.950, down $0.172 or -5.51%.

Bespoke Weather Services Outlook

Weather data was “decidedly” bearish trending over the weekend, with forecast demand dropping compared to Friday’s expectations, according to Bespoke Weather Services.

Models showed a “strong” positive Eastern Pacific Oscillation (EPO) at the end of the month that signals “what is increasingly likely to be a warm to very warm start to December,” the forecaster said. “…In order to weaken the positive EPO signal, we need to see a meaningful shift in tropical forcing eastward away from the Indian Ocean/far West Pacific. So far, we do not see signs of this, but it is something that will take time to occur.

NatGasWeather Short-Term Weather Outlook

According to NatGasWeather for November 16 to 22, “A cold shot will track across the Midwest and Northeast Monday – Wednesday with rain and snow and chilly lows of 10s to 30s for a swing to stronger national demand. The southern U.S. remains warm with/highs of 60s to 80s, while weather systems with rain and snow continue into the Northwest with mid to cool highs of 30s to 50s.

After the Northeast system exits Wednesday, much of the U.S. will become warmer than normal Thursday – Sunday with highs of 50s – 60s North and 60s to 80s South for light national demand. Overall, moderate demand through Wednesday, then low.”

US Energy Information Administration Weekly Storage Report

The EIA reported on Friday that domestic supplies of natural gas rose by 8 million cubic feet for the week-ended November 6. On average, the supply data, which were delayed by a day this week due to Wednesday’s Veteran’s Day holiday, were expected to show a decline of 4 billion cubic feet for the week, according to analysts polled by S&P Global Platts.

Total stocks now stand at 3.927 trillion cubic feet, up 196 billion cubic feet from a year ago, and 176 billion cubic feet above the five-year average, the government said.

Daily Forecast

The hits just keep on coming for a market that just two weeks ago showed a record number of long futures and option positions. The selling could even extend into next week based on the comments from analysts at Tudor, Pickering, Holt & Co (TPH).

They are looking for another net injection for this week’s U.S. government storage report as “old man winter remains tardy.” The firm issued a preliminary estimate for a 20 Bcf injection.

“Friday’s build wasn’t unusual from a seasonality perspective, as six of the last seven years have reported builds for the corresponding week, but this week’s build would represent a material departure from norms of minus 46 Bcf,” the TPH analysts said.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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