Natural Gas Price Fundamental Daily Forecast – Looking for Knee-Jerk Reaction to Government Stimulus Plan

Natural gas prices are trading nearly flat on Monday after short-sellers covered positions following the announcement of more monetary stimulus from the U.S. Federal Reserve and as they await Congress’ decision on new fiscal stimulus. Earlier in the session, natural gas hit another 25-year low as steps taken to slow the spread of coronavirus cut into economic growth and energy demand.

At 14:21 GMT, May natural gas is trading $1.668, down $0.007 or -0.42%.

With businesses, schools and factories shutdown and mild temperatures in the forecast, it’s hard to see where demand will come from in the near-term. Nonetheless, prices could suddenly spike higher due to fiscal and monetary stimulus announcements. Essentially, this will be just speculators buying natural gas because it’s relatively cheap.

There is little demand growth left to support the gas market since most coal-to-gas fuel switching has already occurred and the power and industrial sectors were expected to consume less gas in coming months due to economic worries.

Even before the coronavirus started to spread, natural gas prices were already trading near multi-year low levels as record production and months of mild temperatures enabled users to store more gas, making fuel shortages and price spikes unlikely this winter.

Now that spring has arrived, demand could drop even further since the latest forecasts indicate “not-to-hot, not too cold” patterns.

Short-Term Weather Outlook

According to NatGasWeather for March 23-29, “Chilly conditions will linger across the northern ½ of the US into Monday with lows of 10s to 30s for strong demand. There will also be areas of rain and snow over California and the east-central/eastern U.S., although with little cold air.

Warm conditions currently over the southern US will expand to include most of the US by mid-week apart from portions of the far West. With highs of 70s and 80s across much of the southern US and 40s and 60s most elsewhere Tuesday through Thursday, national demand will again be light. Weak cool shots will impact the far northern US late this week and next weekend for a minor increase in traditional demand.

Daily Outlook

We could see some short-covering in response to a government stimulus package, but the move isn’t likely to last. Consumers aren’t likely to use more natural gas to heat their homes if the government gives them a check.

Self-quarantine has to end in order to give this market a chance to rally. Schools, factories and businesses have to reopen too.