Natural Gas Price Fundamental Daily Forecast – EIA report expected to show a build in the low to mid-60s Bcf

Natural gas futures are inching lower early Thursday after spiking to the upside the previous session. The move was fueled by a sharp rise in export demand following maintenance. Meanwhile, production came in lower for a second straight day.

The weather forecasts continued to come in spotty, highlighted by a few small changes to the long-range outlook on Wednesday.  However, the pattern was still expected to result in relatively light demand east of the Plains for the next few days, according to NatGasWeather.

At 06:52 GMT, September natural gas futures are trading $3.319, down $0.014 or -0.42%.

Short-Term Weather Outlook

The overall U.S. pattern is set to become hotter for the five-to 15-day forecast and is likely viewed as having a “bullish lean” for Saturday (June 26) through July 5. National cooling degree days are forecast to be above normal.

“Sure, the pattern could be more intimidating, but there’s still enough coverage of highs reaching the upper 80s to 100s to result in smaller-than-normal weekly builds the last week of June and the first week of July,” NatGasWeather said. “And the upper pattern does favor widespread above-normal temperatures holding into the second week of July to keep strong national demand going for 15- to 20-day period.”

Energy Information Administration Weekly Storage Report

The EIA is scheduled to release its weekly storage report at 14:30 GMT. Last year, the EIA recorded a 115 Bcf injection, and the five-year average injection stands at 83 Bcf. Traders are looking for a build in the low to mid-60s Bcf.

According to Natural Gas Intelligence (NGI), Reuters polled 17 analysts, whose estimates ranged from a build of 56 Bcf to 79 Bcf, with a median injection of 68 Bcf. A Bloomberg survey of 10 analysts produced a tighter range of estimates, with a median injection of 64 Bcf. NGI’s model predicted at 68 Bcf build.

Daily Forecast

Chart-watchers will be eyeing trader reaction to yesterday’s high at $3.386. Taking it out could trigger labored really into $3.447 and $3.356. If sellers come in to stop the rally then look for a possible near-term pullback into $3.206.

Fundamentally, we could see a muted reaction to the EIA report with most traders already looking at the possibility of strong national demand over the next 15- to 20-day period.

The wildcard will be a resurgence in liquefied natural gas (LNG) demand. EBW Analytics Group pointed out that European gas storage is currently at its lowest seasonal level ever. Traders could start pricing in stronger demand later in the year.

Finally, the analyst team at Tudor, Pickering, Holt & Co (TPH) is keeping a close eye on power generation. Heading into the summer, the analysts expect demand destruction to play an important rose in balancing the market as prices rallied.