Natural Gas Price Fundamental Daily Forecast – Early Weekly EIA Storage Report Estimate is 91 Bcf

Steady temperatures over the week-end and expectations for more seasonal temperatures this week are helping to hold natural gas futures in a range early Monday.

The guesses are already in for this Thursday’s U.S. Energy information Administration’s weekly storage report so that means traders will be watching all week for changes to the report estimates.

Additionally, investors will be looking at weather forecasts 10-14 days out. These will be coming in periodically throughout the week. Both of these factors will drive the price action and the volatility this week.

At 0647 GMT, July Natural Gas is trading $2.966, up 0.004 or +0.14%.

Summary

Early indications are that this week’s EIA report for the week-ending June 1 will again see injections fail to eclipse the triple-digit mark, potentially growing deficits in the process.

According to The Desk’s Early View, natural gas storage survey respondents on average are expecting a 91.5 Bcf build for the period, with a median of 91 Bcf. That’s versus 103 Bcf recorded last year and a five-year average 104 Bcf injection.

The further out winter months are stronger than the nearby months. This is supportive on a technical basis. However, don’t expect to see a spike in nearby prices through $3.043 unless we see a hotter temperature outlook, combined with a bullish storage report for the week. Even if nearby prices did reach this level, hedgers would likely come in to stop the rally. The longer-term bullish play is in the deferred contracts, not the nearby contract.

Weekly Facts

• According to the U.S. Energy Information Administration report, natural gas storage in the U.S. rose by 96 billion cubic feet (bcf) in the week-ended May 25. Traders were looking for about 100 Bcf with some estimates coming in as high as 107 Bcf.
• That compared with a build of 91 Bcf in the preceding week, an increase of 81 Bcf a year earlier and a five-year average rise of 97 Bcf.
• Total natural gas in storage currently stands at 1.725 trillion cubic feet (Tcf), according to the EIA.
• That figure is 788 Bcf, or around 31.3%, lower than levels at this time a year ago, and 500 Bcf, or roughly 22.4%, below the five-year average for this time of year.

Forecast

Predictions of another week of injections below 100 Bcf are underpinning the market. Even if we did see some weakness, it will likely be fueled by profit-taking, not aggressive shorting. Furthermore, a move into support at $2.899 to $2.877 is likely to be gobbled up by buyers, just like they did last week.

The problem with trading the nearby contract is with the $3.00 to $3.043 area. If we hit this area as we approach the rollover into the August futures contract, we’re likely to see hedgers come in to lock in prices. This could limit gains. Therefore, if you want to trade for a summer heatwave then start trading the deferred months. That’s where the speculative action is.

Currently, traders are pricing in average to slightly above average demand. This is helping to underpin prices just shy of the psychological $3.00 level. If the weather services put heat back into the 10-14 day forecast then prices should jump this level.

If the estimated injection for this week’s EIA storage report decreases from the current media guess of 91 Bcf then this should also trigger a surge in prices.