Natural Gas Price Fundamental Daily Forecast – EIA Storage Build Expected to Be Slightly Below 5-Year Average

Natural gas futures are edging lower on Thursday, shortly before the release of the U.S. Energy Information Administration (EIA) Weekly Storage report at 14:30 GMT. Helping to prop up prices is near-term heat demand. Putting a lid on prices is a more-than-offsetting drop in demand caused by an outage at the Freeport LNG terminal.

At 11:32 GMT, August natural gas futures are trading $6.725, down $0.147 or -2.14%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $23.20, up $0.11 or +0.47%.

Short-Term Weather Outlook

According to NatGasWeather for June 23-29, “National demand will be strong through the weekend as hot high pressure rules the southern 2/3 of the U.S. with widespread highs of 90s to 100s, hottest from Texas to the Mid-Atlantic Coast. Nice to warm conditions will rule the northern 1/3 with highs of 60-80s.

National demand will ease early next week as weather systems with showers cool the central and northern U.S. into the upper 60s to 80s, although very warm to hot over the western and southern U.S. as high pressure rules with highs of mid-80s to 100s, including highs of 90s across the Northwest.”

Bespoke Weather Services said the latest weather data continued to show a return to more seasonal temperatures in the final days of June and into early July.

Energy Information Administration Weekly Storage Report

NatGasWeather says “For today’s EIA storage report, a large spread in survey averages between +60 Bcf and +70 Bcf, but with the most notable at +63 Bcf, moderately smaller than the 5-year average of +82 Bcf.”

Natural Gas Intelligence (NGI) says the report that covers the week-ending June 17 will offer another glimpse of the impacts of the Freeport explosion on government weekly storage figures.

NGI is reporting that Reuters polled 13 analysts, whose storage injection estimates ranged from 56 Bcf to 76 Bcf, resulting in a median increase of 66 Bcf. A Bloomberg survey produced a lower median projection of 59 Bcf, though the range of estimates was the same. A Wall Street Journal poll, meanwhile, had a tighter forecast range, with an average build of 66 Bcf.

Daily Forecast

Today’s EIA storage build would have been smaller if not for the Freeport LNG outage that added up to 2 Bcf/day in supplies.

EBW noted that taking into account the Freeport outage, the storage trajectory this injection season has increased from slightly above 3.3 Tcf to 3.52 Tcf. This would leave stocks within 120 Bcf of the five-year average by the end of October.

Technically speaking, the August natural gas futures contract is hovering just above a major support zone at $6.587 to $5.865. Buyers came in earlier in the week at $6.531 so they are aware of the zone’s importance.

The sweet spot is $6.587 to $6.507. If this area holds as support and the report comes in bullish then look for a spike to the upside.

If $6.507 fails and the report is bearish, prices could plunge over the near-term into $5.865.