Natural Gas Price Fundamental Daily Forecast – EIA Storage Injection Estimated at Below 5-Year Average

Natural gas futures are edging higher for a second session on Thursday shortly before the release of the weekly government storage report at 14:30 GMT. The rally is being underpinned by a large drop in production with lower wind generation providing an additional boost.

The market jumped about 5% on Wednesday, erasing most of the prior session’s losses, as preliminary data showed a drop in output and power demand in Texas hit monthly record highs. The price jump took place despite forecasts for lower gas demand over the next two weeks than previously expected.

At 12:43 GMT, July natural gas futures are trading $8.996, up $0.300 or +3.45%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $29.77, up $1.86 or +6.66%.

Production Takes Nosedive

Natural Gas Intelligence (NGI) is reporting Bloomberg data showed big production drops in several regions. The Haynesville was down more than 5% day/day, while the Midcontinent was down around 3.5%. Appalachia and Rockies output also fell around 3%. Total output was around 94.5 Bcf on Wednesday, off about 2.4 Bcf day/day.

Additionally, data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 95.1 bcfd in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in December 2021.

On a daily basis, however, output dropped by 2.8 bcfd to a preliminary 92.9 bcfd on Wednesday. That would be the biggest one-day drop since early February, but traders noted first of the month declines are revised higher.

EIA Weekly Storage Report

In this week’s EIA Weekly Storage report, traders will be looking for signs of continued tightness in the market following last week’s bullish surprise.

NGI is reporting that major analysts are looking for an injection in the 80s. A Wall Street Journal poll produced estimates ranging from 73 Bcf to 92 Bcf, with an average build of 84 Bcf. A Bloomberg survey had a tighter range of projection, producing a median injection of 86 Bcf. Reuters polled 14 analysts, whose estimates ranged from injections of 76 Bcf to 93 Bcf, with a median increase of 87 Bcf.

Last year, 100 Bcf came into storage during the similar week, while the five-year average injection also is 100 Bcf.

Daily Forecast

With the summer cooling season rapidly approaching, the weekly government storage reports are likely to take on more importance. Traders expect to see cooling demand, but they don’t know when. In the meantime, the short-term focus will be on production, especially after yesterday’s plunge in output.

One thing about production, it can be revised sharply higher in a heartbeat so prepare for volatility.

As far as today’s EIA report is concerned, the market hasn’t experienced a summer without a triple-digit build in six years, so a number in the 100s today would be an extremely bearish surprise.

Anything in the 94 to 100 range will also be bearish, while a reading under 73 should spike prices sharply higher.