Natural Gas Price Fundamental Daily Forecast – Normal Correction Could Drive Prices Back to $4.867 – $4.649

Natural gas futures are inching lower on Friday following a weak trade the previous session. The price action suggests the market may be getting ready to roll over to the downside amid profit-taking following the negative impact of Hurricane Ida over two weeks ago and the avoidance of any major damage from Hurricane Nicholas earlier in the week.

At 09:36 GMT, December natural gas futures are trading $5.455, down $0.037 or -0.67%.

While we don’t expect to see a change in trend, we do think there is room for a normal 50% to 61.8% correction of the recent rally. This target zone is $4.867 to $4.749. Our work suggests this area represents value that could be attractive to new buyers.

Besides the easing of hurricane-related production worries, traders were also encouraged to book profits after the government’s weekly storage report showed a larger than expected injection and after new weather forecasts shifted to cooler, easing heat-related demand.

US Energy Information Administration Weekly Storage Report

Natural gas futures tumbled on Thursday after the EIA reported that domestic supplies of natural gas rose by 83 billion cubic feet (Bcf) for the week ended September 10. Ahead of the report, a consensus of estimates called for a build of 76 Bcf.

Energy Aspects estimated a 74 Bcf build and said this week’s report could launch a “string of more robust shoulder-season injections.”

According to Natural Gas Intelligence (NGI), a Wall Street Journal survey landed an average build estimate of 74 Bcf, with a range of 59 Bcf to 80 Bcf. A Reuters poll found injection estimates spanning from 59 Bcf to 85 Bcf, with a median of 77 Bcf. NGI estimated a 72 Bcf increase.

The five year average for this time of year is an increase of 79 Bcf. For the comparable week a year earlier, the EIA reported a build of 86 Bcf.

According to the EIA, total stocks now stand at 3.006 trillion cubic feet (Tcf), down 595 Bcf from a year ago and 231 Bcf below the five-year average.

Short-Term Weather Outlook

According to NatGasWeather for September 17-23, “The Midwest and Northeast will be comfortable with highs of 70s to 80s as weak cool fronts track through with showers. California to West Texas remains hot with highs of upper 80s to 100s as high pressure rules.

The East will be warm to very warm with highs of 80s to near 90 besides 70s in New England. The Northwest into Northern California will cool into the 60s and 70s the next few days as a wet Pacific system brings heavy rains, especially to the Northwest Coast.

Most of the U.S. will be comfortable next week with highs of 70-80s besides hotter 90s Southwest deserts. Overall, national demand will be moderate to low.”

Daily Outlook

Over the short-run, we expect a normal pullback as speculators book profits as problems caused by the pair of hurricanes continue to ease. We could also see a series of storage builds that could cap gains, but not necessarily lead to a change in trend.

Nonetheless, the United States is on track to fall short of 3.5 Tcf of gas in storage when injection season typically ends on October 31. That compares with more than 3.9 Tcf in 2020. This could lead to even higher prices in late 2021 and early 2022 if the coming winter produces harsh conditions.