Natural Gas Price Fundamental Daily Forecast – European Demand for US LNG Could Trigger Short-Covering Rally

Natural gas futures are trading higher for a second session on Tuesday, putting the market inside the key technical area that is controlling the near-term direction of the market. Natural Gas Intelligence (NGI) pinned Monday’s reversal to the upside on the tapering of domestic production and steady demand from Europe for U.S. exports.

At 11:00 GMT, January natural gas futures are trading $5.237, up $0.133 or +2.61%.

The price action suggests investors may have recognized value following a prolonged move down in terms of price and time. Meanwhile, speculators may have stepped up their buying on the hopes of colder conditions in early December.

Tapered Production, Strong LNG Export Demand Spark Price Rebound

Last week, production held close to 2021 highs around 95 Bcf/d, but early estimates from Monday showed output was beginning to level off slightly below that level.

“Tapering production” along with strong export demand helped prop up NYMEX futures, EBW Analytics Group said.

Europe Renews Call for US Liquefied Natural Gas

LNG feed gas volumes hovered around 11 Bcf Monday, with export destinations in Europe in particular clamoring for U.S. gas amid a supply shortage on that continent, NGI wrote.

One reason for the renewed demand for U.S. LNG is doubt Russia will be able to fulfill its promise to supply Europe with enough gas for winter.

NGI reported Russia has promised to ramp up pipeline supplies to Europe, but Russian exporter Gazprom PJSC chose not to allocate pipeline space in advance for flows sent through Belarus and Poland toward Germany, a Bloomberg analysis showed, nor did it reserve additional pipeline capacity offered at the border with Ukraine.

This called into question whether Russian gas would prove meaningful in helping Europe balance supplies with winter demand, especially if the coming season is particularly cold.

Early Look at Thursday’s US Government Storage Report

The early estimates ahead of Thursday’s Energy Information Administration (EIA) weekly storage report call for a late-season injection.

According to NGI, Bespoke modeled a 25 Bcf increase for the week-ended November 12. NGI estimated a build of 23 Bcf. Last year, the EIA recorded a 28 Bcf build. The five-year average is for a withdrawal of 12 Bcf.

Daily Forecast

Monday’s technical reversal bottom has brought the daily chart back into focus.

The main range is $4.009 to $6.667. The market is currently trading inside its retracement zone at $5.338 to $5.024. Natural gas has been consolidating around this area for about five days which may be suggesting investors are finding value.

Look for an upside bias to develop on a sustained move over $5.338. If this creates enough upside momentum, we could see a surge into $5.739 – $5.958.

A sustained move under $5.024 will be a sign of weakness. This could lead to a retest of $4.811. This price is a potential trigger point for an acceleration to the downside with $4.009 the nearest major target.