Natural Gas Price Fundamental Daily Forecast – Jump in European LNG Demand Could Trigger Short-Term Rally

Natural gas futures are inching higher on Friday while continuing to consolidate around the lower level of a key technical retracement zone. This area is controlling the near-term direction of the market.

The fundamentals supporting the market in this area are an easing of production, a jump in liquefied natural gas (LNG) export demand and the anticipation of colder weather and more aggressive storage withdrawals.

At 13:12 GMT, January natural gas futures are trading $5.067, up 0.072 or +1.44%. This puts the market only slightly below last week’s close at $5.104 after touching its lowest level since September 8 earlier in the week.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 26 billion cubic feet (Bcf) for the week-ended November 12.

Ahead of the report, Natural Gas Intelligence (NGI) reported, a Reuters poll of analysts found estimates ranging from injections of 18 Bcf to 33 Bcf, with a median build of 25 Bcf. Estimates in a Bloomberg survey spanned increases of 19 Bcf to 28 Bcf, with a median of 24 Bcf. NGI’s model is predicting a 23 Bcf build.

The five-year average for the week, however, is a withdrawal of 12 Bcf, according to EIA.

Total stocks now stand at 3.644 trillion cubic feet (Tcf), down 310 Bcf from a year ago and 81 Bcf below the five-year average, the government said.

Short-Term Weather Forecast

According to NatGasWeather for November 19 – November 25, “A weather system will exit the Great Lakes and track across the Northeast today with rain, snow, and chilly lows of 20s to 30s. However, most of the rest of the U.S. will be mild with highs of 50s to 80s for light demand.

A milder break is expected Sunday as much of the U.S. warms into the 50s to 80s for light demand. However, national demand will increase early next week as a frosty weather system with rain and snow tracks across the U.S with lows of 5 degrees Fahrenheit to 30s, coldest in the Midwest.

National demand will ease late next week as a mild break follows. Overall, national demand will be moderate through the weekend, high early next week, then back to moderate after.”

Daily Forecast

Technically, trader reaction to $5.024 will determine today’s direction. The market has straddled this level eight out of the last nine sessions. Persistently low volume and the lack of fresh weather news has prevented a major breakout in either direction.

A sustained move over $5.024 will indicate the presence of buyers with $5.338 the first target. Overcoming this level will indicate the buying is getting stronger.

A sustained move under $5.024 will signal the presence of sellers with $4.811 the next likely target.

I don’t like shorting new lows so with winter approaching, the best low-risk bet is to look for a good entry price on any weakness under $4.811.

Fundamentally, the U.S. weather pattern is still bearish, but Europe may experience a cold blast. If prices are going to spike higher then it will be triggered by an unexpected surge in European demand for U.S. LNG exports.