Natural Gas Price Fundamental Daily Forecast – Lower as Updated Forecasts Predict Less Weather-Driven Demand

Natural gas futures are edging lower but off its intraday low late Monday after dropping more than 5% early in the session. Gains are being capped by forecasts for lower demand over the next two weeks than previously expected, near record output and ahead of the expiration of the front-month December contract.

At 18:22 GMT, February natural gas futures are trading $7.205, down $0.125 or -1.71%. This is up from an intraday low of $6.929. The United States Natural Gas Fund ETF (UNG) is at $21.93, down $0.77 or -3.39%.

EBW Predicts Less-Weather Driven Demand

Prices moved sharply lower on Monday from the opening as analysts pointed to updated forecasts that advertised markedly less-weather-driven demand compared to pre-Thanksgiving expectations.

The weaker weather-driven demand outlook has “set a decisively bearish tone heading into today’s December contract final settlement,” EBW Analytics Group analyst Eli Rubin told clients.

NatGasWeather Sees Warmer Trends for Early December

Weather models over the weekend extended warmer trends for the first week of December.

“However, much of the weather data favors a rather chilly U.S. pattern setting up Dec. 8-11,” a time frame where “colder trends were observed” in the latest model runs, the firm said.

However, it’s questionable whether traders will “actually believe a colder pattern will arrive” given the data “once suggested a rather cold U.S. pattern was coming” during the first week of December “only to have it reverse notably warmer,” NatGasWeather added.

Refinitiv Forecasts above Normal Heating Degree Days

Data provider Refinitiv forecasted 404 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states. The normal is 362 HDDs for this time of year. HDDs, which are used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65F (18C).

Refinitiv Supply/Demand Stats

Refinitiv projected that average U.S. gas demand, including exports, would rise from 116 bcfd this week to 127.8 bcfd next week.

Refinitiv also said that average gas output in the Lower 48 states rose to 99.6 bcfd so far in November from record 99.4 bcfd in October.

Short-Term Outlook

The bias is expected to be to the downside this week until the December futures contract expires. Then prices could rebound. The catalyst behind any rally is likely to a national railway strike and the return to service by the Freeport LNG terminal that has been offline since June 8.