Natural Gas Price Fundamental Daily Forecast – Prices Spike on Expectations of Higher Cooling Demand

Natural gas prices are trading higher on Friday after an early session spike to a multi-year high. The price action indicates that traders have shrugged off yesterday’s uneventful government storage report and have shifted their focus to the next two government reports and potentially bullish end-of-the-month weather forecasts.

At 13:04 GMT, July natural gas futures are trading $3.242, up $0.093 or +2.95%.

Energy Information Administration Weekly Storage Report

The EIA reported on Thursday a 98 Bcf injection into inventories for the week-ending June 4. Traders were looking for the EIA’s storage report to show a sizable build, with estimates ranging from an injection in the 90s to low 100s. The consensus was calling for an injection of 99 Bcf.

Ahead of the report, Natural Gas Intelligence (NGI) reported a Bloomberg survey of nine analysts produced an injection range between 91 Bcf and 104 Bcf, with a median forecast of 110 Bcf. A Wall Street Journal poll of 13 analysts had a wider range up to 111 Bcf, with an average build of 100 Bcf. Reuters polled 19 analysts, whose estimates ranged from a build of 90 Bcf to 110 Bcf, with a median injection of 97 Bcf. NGI’s model predicted a 100 Bcf build.

That would compare with last year’s 95 Bcf injection for the similar period and the 92 Bcf five-year average, according to EIA.

Total working gas in storage as of June 4 stood at 2,411 Bcf, which is 383 Bcf below last year and 55 Bcf below the five-year average, the EIA said.

NatGasWeather Short-Term Outlook

According to NatGasWeather for June 11-17, “The southern U.S. remain hot with highs of 90s and 100s due to strong upper high pressure. A weather system over the Ohio Valley and Mid-Atlantic Coast continues to bring showers with warm highs of 80s. California and the Northwest remain mild to nice with highs of 60s to 80s as a new Pacific weather system arrives with showers.

Dangerously hot high pressure will shift over the Southwest and Plains next week with highs of 90s to 115 Fahrenheit, hottest in the deserts, while weather systems with showers sweep across the Great Lakes and East with highs of 60s to 80s. Overall, high national demand this week.”

Daily Forecast

The weather pattern for the June 22-27 period is expected to gain increasing importance over the short-run with expectations of stronger demand.

The next two weeks of storage data are likely to be closer to normal until more impressive heat builds over the eastern half of the country, according to NatGasWeather.

“Essentially, we don’t expect big changes in supply deficits versus the five-year average until late June, but then with the potential to increase if hotter patterns come to fruition by the start of July.”