Natural Gas Price Fundamental Daily Forecast – Pressured by Bearish Weather Outlook, Russian Supply in Europe

Natural gas futures are inching higher early Thursday after closing lower for the fourth straight session on Wednesday. The market took out a key technical level at $4.956, triggering some short-term sell stops, but longer-term buyers, looking for value, may have come in to stop the price slide at $4.725. They may be trying to avoid a sharp break into the next major support into $3.944.

At 05:42 GMT, December natural gas futures are trading $4.922, down $0.042 or -0.86%.

Mild weather forecasts continued to weigh on demand expectations as traders shrugged off a neutral government storage report. Traders also worried about a potential decline in demand for liquefied natural gas (LNG) exports as a sharp rise in the U.S. Dollar made dollar-denominated commodities more expensive to foreign buyers.

US Energy Information Administration Weekly Storage Report

The EIA reported on Wednesday that domestic supplies of natural gas rose by 7 billion cubic feet for the week-ended November 5. That was less than half the average increase of 15 billion cubic feet forecast by analysts polled by S&P Global Platts. The government released its report a day early because of Thursday’s Veterans Day holiday.

Ahead of the government report Natural Gas Intelligence (NGI) reported a Bloomberg poll found injection estimates ranging from 8 Bcf to 15 Bcf, with a median of 9 Bcf. Reuters’ weekly survey landed at a median build of 10 Bcf, with a low estimate of 3 Bcf and a high of 15 Bcf.

NGI forecast a build of 15 Bcf. Energy Aspects also landed on a 15 Bcf injection for the upcoming report. For the year-earlier period, EIA recorded an injection of 2 Bcf, and the five-year average is a 25 Bcf build.

Total stocks now stand at 3.618 trillion cubic feet (Tcf), down 308 Bcf from a year ago and 119 Bcf below the five-year average, the government said.

Near-Term Weather Forecast

“Model projections heading into late month are quickly trending toward a Pacific pattern that is much less favorable for cold air delivery into the U.S., and in fact increases risk that the pattern heads back warmer than normal” moving into December, Bespoke Weather Services said.

NGI wrote that after a brief cold snap expected late this week, the firm added, the late-November “shift is not something that as of yet carries good confidence, differing wildly from what the projections looked like just a few days ago.” But it “does give the weather component more of a bearish tilt.”

Daily Forecast

The key level to watch on Thursday is $4.956. A sustained move under this level will indicate the selling pressure is getting stronger. A sustained move over this level will mean the selling pressure is weakening. The market will strengthen if the buying momentum is strong enough to overtake $5.269.

The wildcard is natural gas prices in Europe, a key destination for U.S. exports of LNG. They dropped this week amid forecasts calling for a late start to winter as well as Russian pledges to ramp up pipeline exports to the continent.

Essentially, demand for Russian gas could dampen the need for U.S. gas. Furthermore, a spike in the U.S. Dollar is making dollar-denominated natural gas too expensive for foreign buyers.