Natural Gas Price Fundamental Daily Forecast – Pressured as Fears of Winter Shortages Subside
Natural gas futures are inching higher early Wednesday after recovering from an early session setback the previous session. Buyers came in on Tuesday just slightly above a major support area as sellers trimmed positions following a steep four-day decline that may have put the market in oversold territory.
At 07:21 GMT, December natural gas futures are trading $5.599, down $0.064 or -1.13%.
Yesterday’s early weakness was fueled by forecasts calling for mild temperatures across most of the Lower 48 through October and signs of easing pressure on international supplies, Natural Gas Intelligence (NGI) reported.
The European and American weather models both lost degree days overnight, with forecasts pointing to seasonally comfortable conditions over the northern United States this week and next, according to NatGasWeather. The pattern remained “solidly bearish” as each of the next 15 days was on track to deliver below-normal demand nationally, the firm said.
“We continue to look toward the end of October into the start of November for more intimidating cold shots into the northern U.S., although forecasts so far this week “failed to show any better until mid-November,” NatGasWeather said.
Bespoke Weather Services Update
Bespoke Weather Services echoed the same outlook as NatGasWeather, NGI wrote. The weather pattern “remains quite hostile toward bringing any cold into the U.S. for the foreseeable future, and we seem to have reached the time of year when this weather is bringing headwinds to the market,” the firm said, noting that wind generation is bringing headwinds to the market,” the firm said, noting that wind generation proved strong in recent days, minimizing natural gas power burns
“Putting it all together, as long as this weather holds, pressure on prices will continue…though we can expect some back-and-forth volatility on the way,” Bespoke said. “If our warmer ideas hold for late month into November, we likely will at least test, and ultimately break under, the $5.00 level.”
Early Look at Thursday’s Government Storage Report
NatGasWeather said earlier in the week, “As we’ve been stating, the longer it takes for widespread hard freezes to arrive into the U.S., the better shape U.S. supplies will be at the start of the draw season and where the theme hasn’t changed since last week,” the forecaster said.
NGI reported lower 48 storage inventories have tracked significantly higher in recent weeks thanks to the milder turn in the weather. Last week, the Energy Information Administration (EIA) reported the largest fall injection in a decade, a monstrous 118 Bcf build for the week ending October 1.
The triple-digit increase trimmed the deficit to the five-year average to 176 Bcf, and estimates for the next EIA report are pointing to another larger-than-normal injection. NGI modeled a 93 Bcf build, which would compare to last year’s modest 50 Bcf increase in inventories and the five-year average build of 79 Bcf.
Technically, the main trend is down but the market is hovering near a major support zone at $5.269 to $4.956. We’d like to see a test of this zone as well as the building of a support base inside this area.
Globally, gas stockpiles remain light following extreme weather this year, and power demand is ramping up in China and elsewhere in Asia. However, the escalation of international prices has been held in check over recent trading sessions after Russian President Vladimir Putin last week issued public comments that markets interpreted as assurances of steady deliveries of gas to Europe this winter.
That being said, we don’t expect to see the start of a strong rally until the cold weather arrives.