Natural Gas Price Fundamental Daily Forecast – Forecasts Calling for 2-Weeks of Lower Demand

Natural gas futures are edging higher on Wednesday after taking a 7% hit the previous session on forecasts for less demand over the next two weeks than previously expected. The market was also being pressured by rising production.

Although the market is down three consecutive sessions, the longer-term uptrend remains intact. What we are going through is a short-term adjustment fueled by liquidation by weak longs. These traders were likely chasing the headlines.

At 11:24 GMT, July natural gas futures are trading $8.297, up 0.152 or +1.87%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $27.89, down $1.69 or -5.71%.

Refinitiv Production, Demand Results

Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 96.0 billion cubic feet per day (bcfd) in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.

Refinitiv projected average U.S. gas demand, including exports, would rise from 86.0 bcfd this week to 86.9 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday before the long U.S. Memorial Day holiday weekend.

The average amount of gas flowing to U.S. Liquefied Natural Gas (LNG) export plants rose to 12.5 bcfd so far in May from 12.2 bcfd in April. That compares with a monthly record of 12.9 bcfd in March. The United States can turn about 13.6 bcfd of gas into LNG.

Bespoke Weather Services See Average Cooling Demand

“The weather pattern remains generally neutral, with a minor gain in forecast demand since Friday, but nothing that wildly deviates us from normal,” Bespoke said. “We have been expecting a trend back in the hotter direction, and still think that can come around the middle of June, but so far, the modeling is not strongly making a move in that direction.

“We do have wind coming later this week, which could tighten balances again via enhanced power burns, after some weakening was seen over the holiday weekend,” the firm added.

Daily Forecast

Traders expect to eventually see an increase in demand because summer heat cannot be delayed forever. This puts the focus on production. If it should top out or begin to decline, prices could jump quickly.

Furthermore, now that the EU has announced its major sanctions against Russia, the country could retaliate by cutting off the gas supply to Europe. This could further drive demand for U.S. exports and bolster Nymex futures.

Technically speaking, the key area to watch over the short-run is $7.984 to $7.639. Buyers could come in on a test of this area.

Fundamentally, a bullish combination of robust LNG exports, expected strong summer cooling demand and choppy production levels could tighten supplies further.

This, combined with favorable prices, could launch the start of another strong rally.