Natural Gas Price Fundamental Daily Forecast – Next Major Move Determined by LNG Demand

Natural gas futures are inching higher on Friday on increasing bets that the impact of Hurricane Delta will be minimal on liquefied natural gas production in the region. Traders are monitoring the situation closely because a direct hit on a facility could put it out of commission for some time. This would cut into LNG demand, which is needed to prevent storage issues before the winter demand season.

At 09:58 GMT, December natural gas futures are trading $3.164, up $0.015 or +0.48%.

US Energy Information Administration Weekly Storage Report

The U.S. EIA reported 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.

NGI reported ahead of the EIA storage report that analyst estimates hovered around a build in the low to mid-70s Bcf. The seven analysts surveyed by Bloomberg responded with estimates ranging from 67 Bcf to 85 Bcf, with a median of 73 Bcf. A Wall Street Journal poll had the same range but arrived at a median of 74 Bcf. A Reuters poll with the same range of projections had a median of 73 Bcf. NGI pegged the build at 75 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for October 9 to October 15, “A glancing cool shot will bring highs of 50s and 60s to the Upper Great Lakes and New England the next few days. Heavy rain and strong winds will arrive along the Gulf Coast today as Hurricane Delta makes landfall into Louisiana, then tracks northward. Mild rains will push into the Northwest this weekend, then into the Midwest next week where it will tap chilly Canadian air for lows of 20s and 30s. The rest of the US will be warm with highs of 70s and 80s besides hotter 90s Southwest. Overall, national demand will be low.”

Daily Forecast

The EIA report was bearish, but traders are focusing on Hurricane Delta and its possible impact on LNG demand.

A direct hit of an LNG facility that causes damage could exert a bearish influence on prices because it will curtail production and shipping.

If Hurricane Delta misses and there is no damage to facilities or any delays in shipping then prices could rise because of expectations of higher demand.

At this time, it’s going to take a combination of strong LNG demand and heating demand to prevent storage problems in about a month.