Natural Gas Price Fundamental Daily Forecast – Market Gaps Higher; Traders Betting on LNG Demand Recovery

Natural gas futures gapped higher early Monday as traders reacted to the possibility of increased liquefied natural gas (LNG) demand after reports showed encouraging news about the damage from Hurricane Delta to production facilities. Although the initial news was bullish, the rally stalled as traders awaited further confirmation that the destruction from the hurricane was minimal and that production could ramp up rather quickly.

At 10:22 GMT, December natural gas futures are trading $3.293, up $0.089 or +2.78%.

Traders are also pricing in a jump in heating demand after forecasts showed the return of cold weather to most of the country later this month.

Special Report from NatGasWeather

On Sunday, NatGasWeather issued a special report saying, “Hurricane Delta made landfall into Louisiana Friday, including a direct hit to the Cameron LNG facility, but only a glancing blow to Sabine Pass. Sabine Pass shows feedgas for today (Sunday), while Cameron is offline.

If Sabine Pass shows feedgas again for Monday that would be bullish in the sense that it implies it didn’t occur much damage. How long Cameron stays offline, of course, will be closely watched.”

Short-Term Weather Outlook

According to NatGasWeather for October 12 to October 18, “Three weather systems will impact the U.S. to open the week with one over the Northwest, a second over the Midwest, and a third over the Mid-Atlantic. Each will bring showers and highs of 40s to 60s, coolest across the Northern Plains.

The rest of the U.S. will be comfortable to warm with highs of 70s and 80s besides the hotter Southwest with 90s. A stronger cold shot will push into the Midwest late this week into next weekend with rain, locally snow, and chilly lows of teens to 40s for stronger national demand. Overall, national demand will be low through Thursday, then increasing to high.”

US Energy Information Administration Weekly Storage Report

The U.S. EIA reported last Thursday that domestic supplies of natural gas rose by 75 billion cubic feet for the week-ended October 2. On average, analysts polled by S&P Global Platts forecast an increase of 71 billion cubic feet. Total stocks now stand at 3.831 trillion cubic feet, up 444 billion cubic feet from a year ago, and 394 billion cubic feet above the five-year average, the government said.

Daily Forecast

The combination of feedgas demand and the return of colder temperatures later in the month should underpin natural gas prices on Monday because it will help alleviate storage concerns before the winter heating season officially begins. Without this potentially bullish combination, prices were doomed to weaken because of potentially bearish storage overflows.