Natural Gas Price Fundamental Daily Forecast – Extending Losses on Weakening Demand, Higher Inventories

U.S. natural gas futures are trading lower at the mid-session on Monday after testing a more-than-two-month low earlier in the session. The catalyst behind the move are a weakening demand outlook and higher inventories.

At 16:00 GMT, November natural gas futures are trading $6.874, down $0.118 or -1.69%. The United States Natural Gas Fund ETF (UNG) is at $23.68, down $0.39 or -1.62%.

Cooler Days are Forecast

Data provider Refinitiv forecasted 76 cooling days (CDDs) over the next two weeks, down from their estimate of 88 CDDs on Friday. CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day’s average temperature is above 65 Fahrenheit (18 Celsius).

Moderating temperatures and a little bit of a resurgence injections are driving prices lower, said Thomas Saal, senior vice president for energy at StoneX Financial Inc.

“The intensity of the falling is a result of high volatility in the market. It went up pretty fast so it is obviously going down pretty fast.”

US Southeast Facing Demand Destruction from Hurricane

Tropical Storm Ian has strengthened into a hurricane and is expected to produce significant wind and storm surge impacts in western Cuba, the National Hurricane Center (NHC) said in its latest advisory on Monday.

Hurricane Ian could bring rain to the southeast United States, likely leading to some demand destruction, Saal said, but added that prices would find some good technical support near $6.40-$6.50.

Ian’s projected path also threatens demand destruction in the form of power outages and cooler temperatures for Florida and the Southeast later this week, NatGasWeather said.

Hurricane Ian on Path to Miss Major Infrastructure

“The track of Ian shifted slightly westward over the weekend and a little closer to oil and gas platforms in the Gulf of Mexico, but still leaving the densest oil and gas infrastructure along the Gulf Coast mostly unaffected,” NatGasWeather said. The storm shifted a little to the East on Monday, however, even further away from oil and gas infrastructure. This shift along with the expected demand destruction is weighing on prices today.

Perhaps softening the blow to the market after the hurricane passes later this week was the possibility of lower production. Whether the major infrastructure is hit or not by the storm, production in the Gulf of Mexico is expected to drop as oil and gas platforms are evacuated.

Short-Term Outlook

The short-term fundamentals are bearish with average daily production hovering near all-time records. Lower heating demand expectations are in the cards around the second week of October. And Hurricane Ian is likely to miss key infrastructure while causing demand destruction.

The technical picture also turned bearish last week when the November natural gas futures contract crossed to the weak side of a key support zone at $7.213-$7.753. This is now new resistance.