Natural Gas Price Fundamental Daily Forecast – Pressured by Potential Hurricane Demand Destruction Worries
Natural gas futures are down sharply on Wednesday as a tropical storm bears down on Florida, raising concerns over potential power outages and a drop in demand.
Today’s weakness comes on the heels of a nearly 12% drop on Tuesday that was fueled by forecasts calling for less cold weather and lower heating demand through late November than previously expected.
Meanwhile, some traders attributed the excessive selling to unproven rumors that the Freeport liquefied natural gas (LNG) export plant in Texas may not return in November.
Traders Monitoring Approaching Tropical Storm
Natural gas traders along with the National Hurricane Center (NHC) are tracking Tropical Storm Nicole as it gathers strength while approaching Florida. The storm could evolve into a demand-destroying hurricane shortly.
“Hurricane conditions are possible across portions of the coast of southeast and east-central Florida beginning late Wednesday or Wednesday night, where a Hurricane Watch is in effect,” they said.
The storm is expected to deliver chilling air, in addition to the range of hazards inherent in any major weather system, erasing cooling demand in the Southeast, while temperatures elsewhere were forecast to prove largely benign until late this week, according to Natural Gas Intelligence.
Short-Term Weather Outlook
According to NatGasWeather for November 9-15, “The eastern half of the U.S. will remain warmer than normal through Friday with highs of 60s to 80s besides the Northeast today as a glancing cool shot will drop highs into the 50s.
The West & Plains will be cool to cold as chilly weather systems sweep through with rain, snow, and highs of 10s to 50s.
Frosty air over the West will spread eastward across the rest of the U.S. on Friday-Tuesday with rain, snow, and frosty lows of -10s to 30s, coldest across the Midwest.
Chilly air will also advance into the southern U.S. with lows of upper 20s to 40s, including much of Texas.
Overall, low demand through Friday, then increasing to high.”
Futures prices are likely to remain under pressure on Wednesday due to forecasts calling for much bigger-than-usual gas storage builds this week and next in the government’s weekly storage report.
Those big inventory builds could boost gas stockpiles to near- or even above normal levels for the first time since January 2022. This would be a major event since most of the year, the market has been underpinned by forecasts calling for a supply deficit at the start of the winter heating season.
One potentially bullish wildcard is the Freeport LNG situation. At this time, the company hasn’t filed any official restart papers with federal regulators. But if and when they do, prices could rise because of increased demand.