Natural Gas Price Fundamental Daily Forecast – Lower at Mid-Session as Freeport LNG News Disappoints

Natural gas futures are trading lower shortly before the mid-session in a move that suggests the market is still in “sell the rally” mode. Nonetheless, the early session strength marked the first two consecutive days of higher-highs since December 6 to December 8. This may not be an indication of the presence of buyers, but it could mean that some of the weaker shorts are taking profits or readjusting positions.

At 16:00 GMT, March natural gas is trading $3.132, down $0.09 or -2.79%. The United States Natural Gas Fund ETF (UNG) is at $10.43, down $0.58 or -5.27%.

Traders are dealing with three events today:  Bearish forecasts for less heating demand over the next two weeks than previously expected, a bullish drop in output as cold weather starts to cause wells to freeze in some producing basins and comments from Freeport LNG that its liquefied natural gas export plant was ready to begin the restart process.

Short-Term Weather Outlook

Forecasts for less-heating demand over the next two weeks than previously expected put a lid on prices today. According to NatGasWeather, “The overnight EC trended warmer Jan 31-Feb 2, but trended colder for Feb. 3-8, overall adding 1 HDD.

The theme has been for widespread cold in the forecast days 11-15 to trend warmer as they roll into forecast days 4-10. But most important, the overnight weather data remained plenty cold enough Jan 30-Feb 6 to still be considered solidly bullish as frigid Canadian air impacts much of the northern and central U.S. with frosty lows of -20s to 20s.”

Daily Output Set to Fall

Data provider Refinitiv said that average gas output in the U.S. Lower 48 states has risen to 98.7 bcfd so far in January, up from 96.7 bcfd in December. That compares with a monthly record of 99.9 bcfd in November 2022.

On a daily basis, however, output was on track to drop about 1.7 bcfd to a preliminary three-week low of 97.4 bcfd on Tuesday as cold weather starts to cause wells to freeze – known as freeze-off in the energy industry – in some producing basins like the Bakken in North Dakota, the Rockies in Colorado, the Permian in Pennsylvania, Reuters reported.

A Little Clarity on Freeport LNG But Not Bullish Enough to Chase the Shorts Out

According to Reuters, the market also is balancing bullish comments from Freeport LNG that its liquefied natural gas export plant was ready to restart process versus bearish expectations that it will still take a lot of time for that plant to actually exit the seven-month outage.

Short-Term Outlook

The chart pattern looked promising for the bulls on Monday. Traders were probably reacting to the Freeport LNG rumor. But once it was revealed that it would take a lot of time before demand would increase, speculative longs bailed out.

Meanwhile, the news of a drop in daily output due to cold weather is a potentially bullish development, but that was offset because it is expected to be over short-period of time. Furthermore, demand is expected to be weaker than expected.

Technically, a short-term bottom may be developing, but the fundamentals are still bearish. With little chance off a near-term freeze to drive up demand, some longs are ready to throw in the towel on this year’s heating season.