Natural Gas Price Fundamental Daily Forecast – Erratic LNG Demand, Comfortable Forecasts Weigh on Prices

Natural gas futures are trading lower for a fourth straight session on Wednesday as worries about demand destruction continued to weigh on prices. We had expected the new front month November futures to take a pounding because it inherited October’s bullish tone, but we were completely caught off-guard by the punishment inflected on the December futures contract.

At 08:56 GMT, December natural gas futures are trading $3.086, down 0.032 or -1.03%.

Traders blamed lofty storage levels, erratic liquefied natural gas (LNG) volumes and a weaker weather pattern in October, according to Natural Gas Intelligence (NGI). They also cited analysts who said the rough start to the new month was anticipated while cautioning that more pressure may lie ahead.

Short-Term Weather Outlook

According to NatGasWeather for September 30 to October 6, “A cool front with showers will track through the East today with highs of 50s and 60s. The West will be very warm with highs of 80s and 90s, locally 100s in California and the Southwest. A stronger cold shot will sweep across Great Lakes and East Thursday through Monday with lows of 30s & 40s, locally 20s, for stronger demand. However, the eastern half of the U.S. will warm back into the 60s to 80s mid-next week for lighter national demand. Overall, national demand will be moderate-low the next few days, then increasing to high late in the week.”

Early Look at Thursday’s EIA Report

Early estimates for Thursday’s EIA storage report – covering the week-ended September 25 – have hovered near 80 Bcf. Bespoke preliminary estimated an injection of 83 Bcf.

“This does not mean the bullish case moving forward has gone by the wayside, but record storage levels and low weather demand can keep pressure on the front of the curve for now,” Bespoke said.

Volatile LNG Demand

Analysts at EBW Analytics Group are saying that LNG feed demand has been incredibly volatile over the past five and a half weeks because of hurricane-related shutdowns and maintenance, and this could be a particularly bearish development. Demand fell 2.9 Bcf/d after Hurricane Laura, rose to 6.0 Bcf/d in mid-September then dropped back to 4.4 Bcf/d.

Demand could rebound in October and support futures, but volatility could weigh on markets until LNG demand steadies.

Daily Forecast

The early EIA estimate of 83 Bcf is just too high. This number needs to be under 50 Bcf or the market could face major storage issues and looming containment threats. We also need to see more stable LNG demand to offset the comfortable fall temperatures.

For a look at all of today’s economic events, check out our economic calendar.