Natural Gas Price Fundamental Daily Forecast – Prices Could Weaken if Production Resumes; New Hurricane to Watch

Natural gas futures rallied last week as production concerns due to the impact of Hurricane Harvey drove short-sellers out of the market. Speculative buyers may have also underpinned the market. At the end of the week, investors were still a little uncertain about how to play the market because at any time, production could resume once the refineries and production facilities come back on-line after the flood water recede.

October Natural Gas futures settled the week at $3.070, up 0.146 or +4.99%.

In other news, the U.S. Energy Information Administration (EIA) weekly storage report showed a build of 30 billion cubic feet (bcf) for the week-ending August 25^th. The increase was below the build of 43 bcf recorded the previous week and also marginally below consensus forecasts of a 32 bcf increase.

The EIA report also showed total stocks are 7.0% below levels from a year ago and just 0.3% above the five-year average, down from 1.5% just a week ago.

Forecast

Traders will continue to focus on the impact of Hurricane Harvey. At the end of the week, traders were expecting to receive data on the disruption to natural gas production and transport. Prices could appreciate further if the extent of the damage is greater than expected and a prolonged delay in getting back to normal production levels is forecast. Any sustainable decline in production would provide underlying support to prices. Prices could weaken if natural gas production resumes.

Early reports suggest that we’ll see an injection of about 70 bcf in this week’s EIA report. Last year, the EIA reported a 38 bcf injection and the five-year average in 58 bcf.

Traders are saying that Hurricane Harvey impacted demand more than it impacted supply. This is why the industry is looking for a large increase in weekly injection.

According to natgasweather.com for the period September 1 to September 7, the remnants of Hurricane Harvey is expected to track across the east-central U.S. the next few days with showers and thunderstorms.

Temperatures remain comfortable over much of the northern U.S. with highs of 70s and 80s, although still very hot with highs of 90s to 110F over the West.

Conditions will quickly warm over the Plains and southern U.S., including Texas as upper 80s and 90s gain ground.

A brief eastern U.S. warm up is expected over the southern Great Lakes and East on Sunday to Monday before an unseasonably cool weather system arrives next week for a return to light national demand.

Overall, national natural gas demand will be moderate to low.

MORE WEATHER

There is another hurricane brewing in the Atlantic. Hurricane Irma is now a category 3 storm as it tracks across the east-central Atlantic Ocean. The storm will remain a major hurricane, Category 3, or greater, throughout the weekend as it continues to track within a favorable environment. Last this week the storm could veer toward the U.S. East Coast or toward the Gulf of Mexico. It’s likely to still be a strong storm then and will need to be watched very closely.

The U.S. East Coast is a highly populated area so this could affect the demand side if it makes landfall. If it travels into the Gulf of Mexico, it will become a major issue if it makes it all the way up to Texas, Alabama and Louisiana. This is where the platforms and refineries are located.