Natural Gas Price Fundamental Daily Forecast – Holding Steady as Speculators Wait for Hurricane Damage Assessment

Natural gas futures are trading higher despite yesterday’s dramatic reversal chart pattern that suggests a short-term top may be forming. There has been no follow-through to the downside so the chart pattern hasn’t been confirmed. Holding inside yesterday’s range indicates investor indecision. Traders are reluctant to make a move until they receive more information on where Hurricane Michael will make land fall and how it will effect natural gas supply and demand.

At 0603 GMT, November Natural Gas futures are trading $3.325, up $0.059 or +1.81%.

Supply/Demand

In addition to the speculative buying fueled by the Hurricane, production lags in recent days and historically low national gas stocks also are likely driving up prices.

S&P Global Platts Analytics is reporting, “U.S. dry gas production is set to decline by 300 MMcf to 82.9 Monday. Output is likely to stay relatively flat over the next seven days.”

Platts also said that “Demand could decline over the next seven days, likely from storm-driven temperature dips and declines in utility gas burns. Total U.S. demand dropped since the start of the weekend because of heating demand in the Northeast and Upper Midwest falling 3.3 Bcf since Friday to 75.9 Bcf Monday.”

Additionally, heating demand is expected to rise due to the arrival of cooler temperatures. The National Weather Service is calling for a likelihood of below-average temperatures across much of the U.S. over the next six to 10 days.

In response to this, Platts Analytics estimates showed that over the next seven days, demand is likely to climb to average 77.5 Bcf/d.

Forecast

Prior to the Hurricane news, the market was expected to be underpinned by a drop in production and increased heating demand due to the expected arrival of cooler temperatures. The Hurricane is attracting speculative buyers.

Once the hurricane passes and damage is assessed, demand may fall, encouraging the specs to book profits and square positions.

So basically, we have to be bullish until we determine the location of the Hurricane’s landfall and can assess the damage to production facilities if any. If the Hurricane misses key production areas then look for prices to retreat because demand should decline due to power outages.