Natural Gas Price Fundamental Daily Forecast – EIA Report Expected to Further Shrink the Storage Deficit.
Natural gas futures are inching lower early Thursday, but trading on the strong side of a key support area that could determine the market’s near-term direction. Prices are holding steady despite estimates calling for a sizable injection in this week’s government storage report. The catalyst propping up prices is another shift in the latest weather data that added demand to the 15-day outlook.
The November futures contract left the board on Wednesday, turning December into the prompt month.
At 09:51 GMT, December natural gas futures are trading $6.122, down $0.076 or -1.23%.
Short-Term Weather Outlook
The analysts at NatGasWeather issued a mixed report that tended to lean a little toward the bullish side. At first glance, however, the forecast tipped a little bearish, calling for mostly mild conditions through the remainder of the week and into the weekend.
NatGasWeather then updated its forecast after it said the Global Forecast System (GFS) trended a little chillier overnight for next week and then continued to add demand in the midday run. Natural Gas Intelligence reported that this pushes the Nov. 1-7 outlook toward the bullish side, according to the forecaster, as lows of teens to 30s were set to increase in coverage over the northern United States and down the Plains.
“The pattern Nov. 8-11 still favors national demand easing to lighter levels,” NatGasWeather said. “However, as we’ve been mentioning, the theme going back to last week has been for seemingly bearish/mild days in the 12- to 15-day period to add demand as they roll into forecast days 6-11.” The forecaster also said that Canadian cold could sneak into the Midwest and interior Northeast for the November 8-12 period.
NatGasWeather also warned of stronger cold shots into Europe in the coming couple of weeks, resulting in a drawdown of storage that already is precariously light ahead of winter.
Energy Information Administration Weekly Storage Report
Today’s weekly storage report, due to be released at 14:30 GMT, is expected to further shrink the storage deficit.
As of October 15, total working gas in storage was 3,461 Bcf, which is 458 Bcf lower than the similar week last year and 151 Bcf below the five-year average of 3,612 Bcf, according to the Energy Information Administration (EIA).
Ahead of today’s report, NGI is reporting that a Bloomberg survey showed injection estimates ranging from 77 Bcf to 94 Bcf, with a median injection of 88 Bcf. The same range was seen in a larger Reuters poll of 17 analysts, in which a median injection of 86 Bcf was produced. The same range of projections in a Wall Street Journal survey averaged at an 85 Bcf injection. NGI modeled a much larger 94 Bcf increase in stocks.
These estimates compare with last year’s 32 Bcf build and the 62 Bcf five-year average build, according to the EIA.
Technically, December natural gas prices will remain strong as long as $6.011 to $5.832 holds as support. Prices could weaken considerably over the short-run if $5.832 fails as support, but this won’t drastically change the trend since value-seeking buyers would likely be waiting for the opportunity to re-enter on the long-side at more favorable price levels.
There are some risks in the market ahead of the EIA report. Obviously a substantially larger build could weigh on prices, but the bigger concern is that temperatures could turn back warmer in mid-November.
This market is going to have to see some colder temperatures deep into November in order to create enough upside momentum to clear the October 6 main top at $6.593.