Natural Gas Price Fundamental Daily Forecast – EIA Report Bearish, Focus Shifts Back to Weather

Natural gas futures are trading lower early Friday following Thursday’s lower close.  The early price action shows that investors are still respecting the support at $3.185 to $3.183.

Given the pair of lower tops at $3.384 and $3.314, there appears to be a downside bias developing, but sellers are going to have to take out $3.183 and $3.161 to confirm the shift in investor sentiment. If all works out as planned by the short-sellers, the main objective or support zone at $3.125 to $3.057 should be reached over the near-term.

Trader reaction to a test of $3.125 to $3.057 will then determine the near-term direction of the natural gas market.

At 0834 GMT, December Natural Gas futures are trading $3.211, down $0.045 or -1.38%.

U.S. Energy Information Administration (EIA) Weekly Storage Report

On Thursday, the EIA reported that U.S. natural gas stockpiles increased by 58 billion cubic feet for the week-ending October 19. This fell within the range of estimates, but was higher than the consensus estimate of 47.

The five-year average for the week is an injection of 77 billion cubic feet, and last year’s storage increase for the week totaled 63 billion cubic feet. Natural gas inventories rose by 81 billion cubic feet in the week-ending October 12.

Total U.S. stockpiles increased slightly week over week to 16.4% below last year’s level and dipped slightly to 16.8% below the five-year average.

The EIA reported that U.S. working stocks of natural gas totaled about 3.095 trillion cubic feet at the end of last week, around 624 billion cubic feet fellow the five-year average of 3.719 trillion cubic feet and 606 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.701 trillion cubic feet for the same period a year ago.

Weather Forecast

Traders have been looking for consistency in the weather models for about two weeks. The models seem to have settled. Short-term, the models point toward back-to-back cold snaps. Long-term or 10-14 days out, temperatures are expected to come in a little above average. Nonetheless, the November heating season is set to begin with a sizable storage deficit.

According to NatGasWeather.com for October 25 to October 31, “A weather system will track up the Atlantic Coast today and Saturday while strengthening with rain and wind. On the backside of it, a weak cool shot will sweep across the Great Lakes and then into the East with lows of upper 20s to 40s. Another weak cool shot will follow into these same regions early next week, then warming. The West will be mild to warm for a couple more days before cooling arrives early next week. Overall, demand will be moderate the next 7-days.

Based on the early price action and the action this week, the direction of the December Natural Gas market today is likely to be determined by trader reaction to $3.183. This is support. If it fails then we should see a move into at least $3.125 to $3.057 over the near-term.