Natural Gas Price Fundamental Daily Forecast – Outlook Gloomy as Stockpiles Rise Along with Temperatures

James Hyerczyk
Updated: Feb 6, 2023, 04:19 GMT+00:00

The week begins with Nat Gas storage inventories tracking well above normal for this time of year and should continue to grow as temperatures warm.

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U.S. natural gas futures fell nearly 2% to a more-than-two-year low on Friday on forecasts for milder winter temperatures than expected over the next two weeks, leading to forecasts of lower heating demand. The price action suggests that even the most stubborn bulls may finally be getting ready to throw in the towel for this winter season.

On Friday, April natural gas futures settled at $2.480, down $0.042 or -1.67%. The United States Natural Gas Fund ETF (UNG) finished at $8.17 or -$0.21%, down 2.51%.

Two Months of Price Destruction

The gas contract was down more than 63% over the past seven weeks, its biggest seven-week collapse in history. January temperatures in the U.S. Lower 48 states averaged about 41.8 degrees Fahrenheit (5.7 Celsius), second warmest on record for the month, Reuters reported.

Meanwhile, data from Refinitiv and the federal government showed the warmest January on record was in 2006 when the temperature averaged 42.8 F.

The near-term outlook isn’t any better either. Meteorologists are saying that once the current extreme freezing conditions exit parts of the country this weekend, then average temperatures will climb back to mostly above-normal levels from Feb. 5 through at least Feb. 18.

Freeport LNG to the Rescue?

Expectations are mounting that the Freeport liquefied natural gas (LNG) export plant in Texas could start pulling in large amounts of fuel as it restarts LNG production in coming weeks, according to Reuters.

Federal regulators this week approved Freeport’s plan to start sending gas to one of the plant’s three liquefaction trains, which turn gas into LNG. On Thursday, Freeport asked regulators for permission to start loading LNG on ships to free up space in the storage tanks for the new LNG expected to be produced soon, Reuters reported.

Although this could be construed as a positive development, keep in mind that professionals still do not expect Freeport to return to full LNG production until mid-March or later.

Getting Freeport LNG back on line is important because when operating at full power, Freeport can turn about 2.1 billion cubic feet (Bcf) of gas into LNG each day. That is about 2% of total U.S. daily gas production.

Weekly Outlook

The week begins with storage inventories tracking well above normal for this time of year and after last week’s Arctic Blast is accounted for, stocks should continue to grow. This gives traders little incentive to drive prices higher, especially as the spring shoulder season nears.

During shoulder season production is expected to rise and demand fall because it’s neither cold enough for heat nor hot enough for air conditioning.

Additionally, traders aren’t looking for Freeport LNG to start a rally, but rather slow down or stop the decline.

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About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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