Natural Gas Price Fundamental Daily Forecast – Less Heat, Lower LNG Demand Weighing on Sentiment

Natural gas futures are flat on Tuesday as traders try to recover from yesterday’s surprise sell-off. Traders found support at a short-term technical area at $4.021 to $3.978 on Monday, but if the weather forecasts continue to shift to the cooler side, we could be looking at a near-term pullback into at least $3.850 to $3.387.

At 12:03 GMT, September natural gas futures are trading $4.058, down $0.002 or -0.05%.

In addition to the cooling long-term forecasts, sellers are also reacting to data that showed weakening liquefied natural gas (LNG) demand.

Models Show Heat Wave Fading by Third Week of August

Ahead of Monday’s opening, traders were counting on the 15-day weather forecast to provide the bullish boost needed to trigger the start of another leg higher. However, this outlook changed as the last several model runs showed the upcoming heat wave fading by the third week of August, Natural Gas Intelligence (NGI) reported.

Bespoke Weather Services said while this week is still expected to be hot, the strongest demand would be in the back half of the period. In addition, the weather pattern for early next week shifted cooler.

“We do still see above-normal heat in the Midwest to East as we head into the final third of the month, however, so the forecast as a whole remains bullish versus even the five-year average, just slightly less so than we had previously,” Bespoke said.

LNG Feed Gas Volumes Off Early Summer High

According to NGI, LNG feed gas volumes remain well off the 11-plus Bcf seen earlier this summer. NGI data showed feed gas deliveries to U.S. terminals sitting at around 10.5 Bcf early Monday; however, some market observers said volumes actually had drifted below 10 Bcf by midday. Regardless, LNG feed gas demand for now remains below earlier highs amid ongoing maintenance events at various facilities.

Daily Forecast

Technically, the direction of the September natural gas futures contract on Tuesday is likely to be determined by trader reaction to $4.021 to $3.978.

Holding above $4.021 will indicate the presence of buyers. However, don’t expect to see a convincing breakout to the upside over $4.205 until the forecasters put the longer-term heat back into the market and LNG exports climb back to at least 11.

A failure to hold $3.978 will signal the presence of sellers or that the buyers have moved to the sidelines. This could trigger a drop into $3.850 to $3.387.