Natural Gas Price Fundamental Daily Forecast – Hedge Funds Still Holding Massively Bullish Positions

Natural gas futures are edging lower on Tuesday on low volume as traders prepare for Wednesday’s expiration of the November Nymex futures contract that could produce some wildly volatile price action. While most of the price movement is being influenced by rising liquefied natural gas (LNG) export demand and a small drop in production, some support is being generated by fresh weather models, which added back some of the previously reported lost demand in the 11-to-15-day forecast.

At 11:51 GMT, December natural gas is trading $3.230, down $0.023 or -0.71%.

According to Natural Gas Intelligence (NGI), spot gas prices surged at the start of the week, driven by strong demand in the country’s midsection. NGI’s Spot Gas National Average leapt 50.0 cents to $2.990.

In other news, NGI data showed feed gas deliveries to U.S. LNG export facilities rose 9.17 Bcf on Monday, up from 8.69 Bcf last Friday.

Intermediate-Term (11-15 Day) Weather Outlook

NGI reported that weather data, particularly from the more entrusted European model, also grew more supportive. Bespoke Weather Services said the European data is now 15 gas-weighted degree days colder than the American model. However, some of this colder trend may be because the European model is overdoing cold over regions that were expected to have some snow cover in the near term. The last couple of model cycles also have been a little slower with bringing projected ridging eastward.

Short-Term (7-10 Day) Weather Outlook

According to NatGasWeather, for October 27 to November 3, “An early season polar front continues to impact the interior West, Plains, and Midwest with rain, snow, and frosty lows of -0s to 30s, including snow into Northern Texas with lows of 10s and 20s. The East remains warm with highs of 60s to 80s, while the far West comfortable and windy with highs of 50s to 70s. Late in the week, the Midwest and central U.S. will warm back into the 50s to 70s, while the Northeast cools into the 30s to 50s as a weather system brings showers. Heavy rain and wind are expected along the Gulf Coast Wednesday to Friday as Tropical Storm Zeta arrives. Overall, national demand will be high this week.”

Daily Forecast

Despite the short-term choppy trade, which is probably tied to the November contract expiration, we remain bullish going into the winter heating season. This assessment is supported by government data that shows the hedge funds are long, with room to add to their bullish positions.

Analysts at The Schork Group said “bulls still have room to roam.” They cited the latest Commodities Futures Trading Commission (CFTC) data, which showed that hedge fund shorts in the primary Nymex and Intercontinental Exchange (ICE) markets fell below 400,000 contracts for the first time since April 2019.

“Bottom line, since summer, a lot of money has poured into this market, with hedge funds holding one of their most bullish positions ever,” Schork analysts said.

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