Natural Gas Price Fundamental Daily Forecast – Prices Plunge on Concerns Over Heating Demand

After showing signs of consolidation on Monday, natural gas prices plunged on Tuesday on concerns over heating demand during the first two weeks of November. The latest weather forecast calls for warmer, more seasonal temperatures over the next two weeks.

December Natural Gas futures settled at $2.896, down $0.070 or -2.36%.

However, Thomson Reuters on Tuesday forecast U.S. gas consumption would rise to an average of 82.8 billion cubic feet per day (bcfd) next week from 79.7 bcfd this week. At the start of the week, it was forecasting 81.9 bcfd for next week and 78.4 bcfd this week.

Traders brushed off these numbers by saying that most of those increases since Monday’s forecast were related to expectations on small rises on several pipelines transporting gas from the United States to Mexico.

In other news, U.S. gas exports overall were expected to average 8.7 bcfd this week, up 47 percent from a year earlier, due primarily to much higher shipments of liquefied natural gas, according to Reuters.

Forecast

Besides the new weather forecast, traders are also reacting to potentially bearish production data.

Reuters is saying that production in the lower 48 U.S. states reached a record 75.8 bcfd last week, easily topping the prior high of 75.0 bcfd in September 2015. Output so far this week averaged 75.2 bcfd.

Looking ahead to Thursday’s U.S. Energy Information Administration’s weekly storage report, utilities likely added a near normal 59 billion cubic feet of gas into storage in the week to October 27, which would leave the amount of fuel in inventory about 1.2 percent below the five-year average for this time of year at around 3.8 trillion cubic feet.

Based on the forecasts for warmer than normal temperatures in December, January and February, prices are likely to remain under pressure and any gains are likely to be limited.

However, it is possible we could see a choppy, two-sided trade over the near-term because some traders believe utilities will continue injecting gas into storage for a few more weeks while others believe that unless supply and demand forecasts change, utilities could start pulling gas out of inventory as soon as next week to meet rising heating demand.