Natural Gas Price Fundamental Daily Forecast – EIA Storage Expected to Show 65 Bcf Build, Hurricane Will Hurt Demand

Natural gas futures are trading flat shortly before the regular session opening and the release of the U.S. Energy Information Administration weekly storage report. On Wednesday, the market spiked to the upside as speculators tried to take advantage of potential disruptions due to the approaching Hurricane Florence, but by the end of the day, technical chart-watchers and hedgers had regained control and the market finished lower for the session.

At 1001 GMT, November Natural Gas futures are trading $2.823, up $0.003 or +0.11%.

Bullish speculators may have played the hurricane wrong on Wednesday, leading to the break into the close. Since production wasn’t likely to be affected much, the play wasn’t to the upside. Instead, lower demand expectations exerted the pressure. Due to widely expected flooding in the Carolinas, Hurricane Florence could have a devastating effect on natural gas demand in the coming weeks.

According to NatGasWeather.com, “Demand wise, Florence will play out primarily bearish from rain, cooling and power outages.”

EBW Analytics said, “Florence will likely bring a mass loss of demand due to widespread, extended power outages, but said that some hedge funds believe that the massive nuclear fleet in the Carolinas could be shut down due to flooding, causing power sector gas demand to soar after transmission service is restored.”

Duke Energy said, “We can’t put power out on the grid if there’s no one to send it to.”

Forecast

While traders are likely to express demand concerns over the potential damage from the hurricane, they will take timeout today to react to the Energy Information Administration (EIA) storage report.

Bloomberg has a range of 59-76 Bcf, with a median of 65 Bcf. Reuters estimate ranges from 60-76 Bcf with a median of 68 Bcf. Bespoke Weather Services projects a 68 Bcf build. Kyle Cooper of IAF Advisors expects a 64 Bcf build. EBW Analytics forecast a 69 Bcf build and ICE futures settled at a 65 Bcf injection.

Additionally, Thursday’s EIA report will be the first to publish estimates based on a new sample selected for the Weekly Natural Gas Storage Report (WNGSR). On September 10, EIA planned to revise estimates for the eight weeks covering July 13-August 31 to gradually phase in the estimates from the new sample.

We don’t expect to see much of a reaction to the EIA report unless the figure is well below expectations and in this case, prices could rally, but gains will be limited because of the demand concerns.

The direction of the November Natural Gas futures contract is likely to be determined by trader reaction to a short-term retracement zone at $2.812 to $2.800. The market could strengthen over $2.812 and weaken under $2.800.

Gains are likely to be limited by $2.859 to $2.888. Losses are likely to be limited by $2.764.