Natural Gas Price Fundamental Daily Forecast – Pressured by Freeport Repair Delay, More Gas into Storage

Natural gas futures are edging higher early Friday following a 17% loss the previous session. The market took out a key support area while testing a three-month low as the shutdown of Freeport LNG’s liquefied natural gas (LNG) export plant in Texas allowed utilities to rebuild depleted stockpiles faster than expected.

The development was big enough for traders to ignore upcoming hotter weather that is expected to keep generators burning more gas to keep homes and businesses cool.

At 08:17 GMT, August natural gas is trading $5.701, up $0.277 or +5.11%. On Thursday, the United States Natural Gas Fund ETF (UNG) settled at $19.01, down $2.86 or -13.08%.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic natural gas supplies rose by 82 billion cubic feet (bcf) for the week ended June 24. That compared to an average forecast for an increase of 74 bcf from analysts polled by S&P Global Commodity Insights.

Total working gas stocks in storage stand at 2.251 trillion cubic feet (tcf), down 296 bcf from a year ago and 322 bcf below the five-year average, the government said.

“To come in 9 bcf above the five-year average injection, in what was another notably hot week for June, was no small feat and was a direct result of Freeport LNG’s outage, healthy renewable generation and stealthily increasing supply last week,” analysts at Gelber & Associates said in a note.

Short-Term Weather Outlook

Earlier in the week, the latest runs of the American and European weather models were showing notably hotter trends day/day, advertising a “rather bullish pattern” for the first 12 days of July, according to NatGasWeather.

“National demand will increase late in the week through next week” as a “hot upper ridge strengthens and retakes ground over the interior U.S. with highs of 90s gaining coverage, including up the East Coast,” NatGasWeather said.

US Regulator Bars Freeport LNG Plant Restart over Safety Concerns

In addition to the larger than expected EIA weekly storage build, news that the second-biggest U.S. liquefied natural gas export facility at Freeport LNG, hit by fire earlier this month, will not be allowed to repair or restart operations until it addresses risks to public safety, a pipeline regulator said on Thursday.

The report combined with the inventory build contributed to the 33% price drop in June, the biggest monthly drop since 2018.

Daily Forecast

Apparently, the expected hot weather over the next two weeks may not enough to offset the damage from Freeport LNG. Additionally, the price action seemingly confirms that more gas is getting into storage than the EIA’s data and those by others is detecting. This opens up the market to more bearish surprises.

We could find out over the next week or two if the market has shifted into “sell the rally” mode.