Natural Gas Price Fundamental Daily Forecast – Pressured by Bearish EIA Storage Report

Natural gas futures closed sharply lower on Thursday after traders finally got a taste of what the demand picture could look like over the near-term due to the impact of the coronavirus in Thursday’s government storage report.

Traders were prepared for the first injection of the year to come in above normal on the various lockdowns and restrictions being imposed due to COVID-19, but not enough to prevent a steep decline.

May natural gas settled at $1.733, down $0.050 or -2.80%.

U.S. Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported a 38 Bcf injection in storage inventories for the week-ending April 3. The estimates were wide, coming in at 9 Bcf to 33 Bcf.

Natural Gas Intelligence (NGI) reported that a Wall Street Journal poll of 12 analysts showed estimates averaging at a 21 Bcf build. Respondents to a Bloomberg survey arrived at a similar range, with a median build of 24 Bcf. A Reuters survey also was looking for a 24 Bcf injection, with a 9 Bcf to 34 Bcf build range. NGI’s model estimated the injection at a much larger 37 Bcf.

These figures compare with a 25 Bcf increase in storage in the same week last year and the five-year average injection of 6 Bcf, according to the EIA.

Total stocks now stand at 2.024 trillion cubic feet, up 876 billion cubic feet from a year ago, and 324 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather, “The first in a series of cold shots will sweep across the Midwest and Northeast the next few days with lows of 20s and 30s. Very warm conditions continue across the southern U.S. with highs of 70s and 80s, locally 90s Southeast. A weather system is slowly tracking through California and into the Southwest with rain and snow, but with only modest cooling. More impressive cold blasts will push into the central and northern U.S. next week with lows of 0s to 20s for strong national demand.”

Short-Term Outlook

The weather models were less bullish at the end of the week than at the start. This is another reason why the rally fizzled.

The Global Forecast System (GFS) was a little colder with the upcoming frigid shot into the central and northern United States, but then milder across those areas April 19-23, according to NatGasWeather.

The market is expected to remain a challenge for traders over the near-term with two-sided volatility expected. These conditions are expected to last until professionals can figure out how long the demand destruction will continue.