Natural Gas Price Fundamental Daily Forecast – Prices Rise after Midday Forecasts Spook Weak Shorts

Natural gas futures climbed on Friday on forecasts calling for higher heating demand in a couple of weeks due to seasonal cooling temperatures. The market’s strength surprised some traders because the overall weather outlook is still calling for milder than normal temperatures through late December.

On Friday, March natural gas futures settled at $3.788, up $0.102 or +2.77%.

Despite Friday’s rally, the futures contract still finished more than 3% lower for the week with most of the loss attributed to Monday’s more than 10% decline.

Friday Recap

The trade was relatively flat early Friday as traders looked for signs of colder temperatures to help offset the mild conditions that have dominated the market throughout November and early December. Their early patience paid off with midday forecasts giving them a small taste of winter cold, or just enough to chase some of the weaker shorts out of the market.

Friday’s Midday Forecast Indicates Sustained Cold May Be Coming but More Proof Needed

While previous forecasts calling for cold failed to gain traction, the latest weather models released at the mid-session on Friday indicate conditions could turn more favorable for the bulls Christmas weekend.

According to NatGasWeather, the overnight data added as many as nine heating degree days (HDD) to the 15-day outlook. Specifically, there were slightly cooler trends across the far northern United States. The midday Global Forecast System followed up with additional gains in projected demand, resulting in a 15-day outlook that added 20 HDDs between Thursday and Friday.

“To our view, the weather data is likely still a little too bearish and risks adding a few more HDDs over the weekend,” NatGasWeather said.

While the latest data suggested that more impressive cold is possible December 25-31, the forecaster said there still is more for the data to prove if it’s to be expected. Also of note is that the chillier air would likely arrive in the middle of the Christmas and New Year holidays, a time of year when gas demand typically is low, thereby limiting its impact on the market.

Traders Eyeing Inventories in Key Region

Natural Gas Intelligence (NGI) reported it may be a bit premature to rule out a material hike in prices. This is because a closer look at the government storage data reveals that inventories in a key region may be drawing down faster than normal.

The EIA said South Central stocks fell by a net 14 Bcf. This included a 7 Bcf decline in salt facilities and 9 Bcf drop in nonsalts.

This is notable considering much of the region continues to enjoy Spring-like weather that has limited heading demand. The South Central region is where most U.S. liquefied natural gas (LNG) is exported – and where much of the pipeline infrastructure is intrastate, meaning it does not fall under federal jurisdiction that requires gas flows to be made publicly available.