Natural Gas Price Fundamental Daily Forecast – Milder Weather, Weak Demand – Formula for Lower Prices

Natural gas futures are under pressure at the mid-session on Wednesday with the selling led by COVID-19 related demand destruction and new forecasts calling for milder weather.

Since the start of the week, models have been consistent in showing moderating temperatures later this month following a stretch of colder-than-normal temperatures this week, according to Bespoke Weather Services.

At 17:08 GMT, June natural gas futures are trading $1.774, down $0.051 or -2.79%.

“The overall theme continues to be for a tame, near-normal demand period after April 20, likely lasting through the end of the month,” Bespoke said.

Natural Gas Intelligence reported that Bespoke said the market is in need of something that can tighten the supply/demand balance “in order to get rally going at the front of the curve.” The weather services firm also pointed to recent Energy Information Administration (EIA) storage reports that have been “very loose.”

“It looks like we are headed for another loose number tomorrow, as demand destruction continues due to the economic shut-downs,” Bespoke said. “There is talk of some partial re-opening of things in a few weeks, but it is unclear if that will actually occur or not.”

Short-Term Weather Outlook

According to NatGasWeather for April 15 – April 21, “Cooler than normal conditions continue across the central and northern US with chilly lows of 10s to 30s, including 20s and 30s again into North Texas. The Northeast will be mild with highs of 40s to 60s. Texas and the South cooled into the 60s and 70s, although warming back into the 70s and 80s late week. The West will be mostly comfortable with highs of 50s to 80s. A reinforcing cold shot is expected across the northern US late this week into next week for continued stronger than normal national demand. However, warmer conditions will build across all but the northern US thereafter for lighter national demand.”

Early Guesses for 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.

A Bloomberg survey was showing a median expectation for a 65 Bcf injection for this week’s EIA storage report, with predictions ranging from 42 Bcf to 78 Bcf.

Last year, the EIA recorded a 73 Bcf build for the similar week, and the five-year average is a build of 27 Bcf.

Short-Term Outlook

Our daily chart points toward further weakness now that the June natural gas futures contract has crossed to the weak side of its short-term retracement zone at $1.786 to $1.828. The next downside target is the contract and multi-year low at $1.649.

According to Natural Gas Intelligence (NGI), EBW Analysts pointed to a “growing recognition that once the current round of cold weather ends, demand for natural gas is likely to plummet, with the potential for the first triple-digit injection of the year” during the last week of April. “After yesterday’s sell-off, bulls are unlikely to return to the natural gas market soon, opening the door to significant further price declines over the next few weeks.”