Natural Gas Price Fundamental Daily Forecast – Expected EIA Build May Be Offset by Robust LNG DemandThe average forecast of 13 analysts participating in a Wall Street Journal survey landed at 73 Bcf. Estimates ranged from builds of 68 Bcf to 79 Bcf.
Natural gas futures are inching lower on Thursday shortly before the release of the government’s weekly storage report at 14:30 GMT. Despite calls for a large number, the market remains well supported by lower production and robust demand for U.S. liquefied natural gas (LNG).
At 10:10 GMT, July natural gas futures are trading $3.014, down $0.004 or -0.13%.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Lower Production, Higher LNG Demand
According to Natural Gas Intelligence (NGI), production estimates at the start of trading on Wednesday hovered around 89 Bcf, roughly 1 Bcf below recent averages and well below pre-pandemic levels.
At the same time, LNG feed gas volumes hung near 11 Bcf, far above year-earlier levels. European gas storage was depleted over a freezing winter and chilly spring, driving demand and higher prices for U.S. LNG. Elevated needs in Europe are boosting prices – and near-term demand – in Asia as well, as traders pay up to attract shipments, according to analysts.
Short-Term Weather Outlook
NatGasWeather on Wednesday said the American and European weather models both “held a bearish U.S. pattern” for Friday through May 25 that would see “only localized heat” over southern parts of the country. The upcoming pattern is especially bearish starting this weekend through next week, when comfortable temperatures are to permeate the Midwest and East, according to the firm.
“The southern U.S. becomes warm to very warm with highs of 80s to 90s,” NatGasWeather said, but it may not be enough to minimize storage injections in May. “The coverage and intensity of highs reaching the 90s over the southern U.S. still isn’t expected to be as widespread as needed to intimidate through May 26 and should result in several large weekly builds near or over 90 Bcf.”
Energy Information Administration Weekly Storage Report
Looking ahead at today’s EIA weekly storage report for the week ended May 7, estimates submitted by Bloomberg showed a median 73 Bcf injection. Predictions ranged from an injection of 68 Bcf up to 92 Bcf. A Reuters poll of 16 analysts showed a range of estimates from an injection of 68 Bcf to 82 Bcf, with a median build of 77 Bcf.
The average forecast of 13 analysts participating in a Wall Street Journal survey landed at 73 Bcf. Estimates ranged from increases of 68 Bcf to 79 Bcf.
Energy Aspects issued a preliminary estimate earlier in the week for an 85 Bcf injection and NGI’s model forecast an 82 Bcf injection.
Last year, the EIA recorded a 104 Bcf injection for the similar week. The five-year average build is 82 Bcf.
Today could mark the start of three consecutive relatively large storage builds, but traders don’t seem to be too concerned about this with July futures prices still hovering just below a multi-month high reached last week at $3.045. This is because the reliable LNG strength has in recent days helped offset forecasts for light weather-driven demand, according to Natural Gas Intelligence.