Natural Gas Price Fundamental Daily Forecast – Nearby Contract Gains Will Be Limited by Low Demand

Natural gas prices continued to strengthen on Tuesday with traders taking their cues from the steep plunge in nearby crude oil futures into negative territory. The price surge on Monday combined with today’s earlier gains suggests traders have set aside their concerns over demand destruction caused by the coronavirus, at least temporarily.

At 14:20 GMT, June natural gas futures are trading $2.043, down $0.016 or -0.91%. Earlier in the session, the market hit an intraday high of $2.066, its highest level since March 11.

The WTI prompt month slid below zero on Monday, and ultimately to a minus $37.63 settlement ahead of Tuesday’s expiration of the light sweet crude contact.

“The thought is that this will force producer shut-ins sooner rather than later, meaning less associated natural gas,’ Bespoke Weather Services said. “We completely agree with the bullishness in the natural gas curve once to next winter, but before then, the picture is not as clear cut.”

Short-Term Weather Outlook

According to NatGasWeather for April 21 to April 27, “Weak cool shots will continue across the Great Lakes and Northeast into early next week with slightly chilly lows of 20s to lower 40s. The southern US will be warm with highs of 70s and 80s, locally 90s. A weather system will bring heavy showers and slight cooling to the Ohio Valley and Northeast today, while the West will be comfortable with highs in the 60s to 80s. Overall, moderate national demand.”

Daily Forecast

Bespoke Weather Services was quick to point out that natural gas is still impacted significantly by demand losses brought on by COVID-19 related shutdowns, and prices are at a level where there is some risk of liquefied natural gas slowdowns as well. “For these reasons, the front-led nature of the late day surprises us, and we have a difficult time justifying prompt-month prices where they currently sit.”

Although the nearby month is trading firm, it’s probably the futures contract that is still most vulnerable to renewed selling pressure due to the current massive supply situation. Traders may renew their bearish outlook once the June contract clears the $2.00 level, but most of the data indicates the winter months are likely to have a bullish tone.