Natural Gas Price Fundamental Daily Forecast – Favorable Weather Indicates Further Downside Pressure

Natural gas futures are trading lower shortly after the opening on Friday. Sellers took out last week’s low at $2.207 earlier in the session, but after touching $2.198, have bounced back above it. The fundamental picture remains bearish so the price action likely reflects profit-taking ahead of the weekend or aggressive counter-trend bottom-picking in front of main bottoms at $2.185 and $2.135.

At 12:19 GMT, November natural gas futures are trading $2.208, down $0.010 or -0.45%.

Three factors are contributing to the downside pressure:  incredible looseness in the market as shown by yesterday’s bearish government storage report, lower spot gas markets and weather models showing weaker demand in the 15-day forecast.

U.S. Energy Information Administration Weekly Storage Report

The EIA reported Thursday that domestic supplies of natural gas rose by 98 billion cubic feet for the week-ended October 4. Trader estimates ranged from an 80 Bcf injection to a 107 Bcf injection.

Wall Street Journal analysts were looking for a median build of 94 Bcf. Bloomberg predicted a 99 Bcf median and NGI projected a 94 Bcf injection.

The EIA reported a 91 Bcf build for the same week last year, and the five-year average stood at 89 Bcf.

Total stocks now stand at 3.415 trillion cubic feet, up 472 billion cubic feet from a year ago, but 9 billion below the five-year average.

Short-Term Weather Forecast

According to NatGasWeather for October 11 to October 17, “High pressure will rule the eastern US today with highs of 60s to 80s apart from showers across the Northeast Coast. A strong weather system will bring rain and snow to the central US and Midwest today with lows of 10s to 30s, then tracking into the Ohio Valley this weekend with lows of 30s & 40s. This system will also cool the southern US with highs of upper 60s to 80s. A reinforcing cool shot will follow next week across the Midwest and Northeast to keep conditions a touch chilly. Overall, stronger demand the next 7-day. Overall, national demand increasing to moderate to locally high this weekend and next week.

Daily Forecast

The long-range weather models have started to converge a little, but neither shows early-season cold lingering around for more than a few days in the major demand areas. With all overnight weather models indicating a little lost demand for the coming 15-day forecast, rallies are likely to be capped.

Models are showing lost demand next week, but a slight pick-up in demand for October 20-24.

With momentum and the trend pointing lower, we could see a wash-out under $2.207 later today with a drive into $2.185 to $2.135.

A short-covering rally is likely to stall at around $2.302.