Natural Gas Price Fundamental Daily Forecast – Milder Weather, Brutal Demand Loss Weighing on Prices

Natural gas prices are trading lower at the mid-session on Tuesday with the selling pressure being fueled by new forecasts calling for milder conditions later this month, a grim outlook for demand.

NatGasWeather said earlier in the day that changes in the overnight guidance were mixed, with the Global Forecast System (GFS) adding around 10 heating degree days for the period from April 21-28 but with the European model trending slightly milder.

At 17:18 GMT, May Natural Gas is trading $1.685, down $0.039 or -2.26%.

The forecaster went on to say that “Both (models) are still quite chilly versus normal through the coming weekend” before cold retreats into Canada, resulting in “mild to warm conditions gaining across most of the country besides the very far North, just with the European model warming the Great Lakes and Northeast quicker.”

“To our view, even with the GFS trending colder overnight, the pattern is likely considered cold enough the next seven days but not cold enough for forecast week two, especially since the overnight European Model remained rather bearish with the setup April 21-27.”

Short-Term Weather Outlook

According to NatGasWeather for April 14 – April 20, “A strong cold shot has arrived into the central and northern US with chilly morning lows of 10s to 30s, including 20s and 30s into North Texas. The Northeast is still mild with highs of 50s and 60s. Texas and the South have cooled into the 40s to 60s, although still very warm 80s to 90s over Florida and portions of the Southeast. The West will be mostly comfortable with highs of 50s to 70s. A reinforcing cold shot is expected across the northern US late this week into the weekend for continued stronger than normal national demand. However, warmer conditions will push northward out of the southern US early next week for lighter national demand.”

An Early Peek to This Week’s EIA Report

Natural Gas Intelligence (NGI) reported that Energy Aspects issued a preliminary estimate for a 60 Bcf build in this week’s Energy Information Administration (EIA) storage report for the week-ending April 10. The firm’s estimates show “plummeting demand” during the period, including a 1.6 Bcf/d week/week drop-off in residential/commercial demand and declines in liquefied natural gas feed gas (down 1.2 Bcf/d) and Mexican pipeline exports (down 0.6 Bcf/d).

“Futures are likely being held up by a combination of factors…The late-season burst of cold could be providing minimal support to prices, although we would argue that given the demand destruction already in progress, it is only a shoulder season band-aid,” Energy Aspects said. “The continued focus on associated production declines” tied to reductions in oil-directed upstream capital spending “is likely also still playing a role.”

Daily Chart

The main trend is up on the daily chart due to last week’s price surge.

The direction this week is likely to be determined by trader reaction to a 50% to 61.8% retracement zone at $1.719 to $1.673.

Look for an upside bias to develop on a sustained move over $1.719 with $1.918 a potential upside target. A downside bias is likely to develop on a sustained move under $1.673 with the next major downside target coming in at $1.521.