Natural Gas Price Fundamental Daily Forecast – Production Outages, LNG Demand, Renewed Heat Providing Support

Natural gas futures are edging lower on Thursday shortly before the release of the government’s weekly storage report at 14:30 GMT.

On Wednesday, the market surged to multi-month high, led by a number of factors including soaring cash prices, forecasts calling for the return of summer-like heat, strong LNG demand, and the on-going production outages in the Gulf of Mexico.

At 12:31 GMT, October natural gas futures are trading $4.867, down $0.047 or -0.96%. On Wednesday, the futures contract jumped $0.347.

Multiple Factors Driving Bullish Tone

Natural Gas Intelligence (NGI) reported that spot gas prices rallied for a second day, led higher by surges in the West. NGI’s Spot Gas National Average soared 61.0 cents to $5.405 a day after advancing 37.5 cents.

Bespoke Weather Services said forecasts Wednesday showed increased cooling degree days in the eastern half of the nation, adding to already robust demand in the West.

In addition to robust domestic demand through the summer months and into September, demand for LNG feed gas has held near or above 11 Bcf for several days – within striking distance of record levels and helping to soak up U.S. supplies.

Finally, NGI reported that given the expected resumption of industrial demand, analysts said the lower output is of greater concern because supply/demand balances were tight prior to Ida and are expected to remain so after the storm’s impacts fade.

US Energy Information Administration Weekly Storage Report

Major surveys are pointing toward a below-average build in the mid-20s Bcf for the week-ending August 27. The five-year average increase was 53 Bcf.

Injection estimates in a Bloomberg poll landed at a median of 39 Bcf. Predictions ranged from 32 Bcf to 58 Bcf. Results of a Reuters survey, meanwhile, ranged from injections of 32 Bcf to 51 Bcf, with a median build of 40 Bcf.

NGI estimated a 38 Bcf injection into U.S. natural gas stocks for the EIA report, which covers the week ended September 3. That would compare with a five-year average 65 Bcf injection. The year-earlier build for the period is also 65 Bcf.

Daily Forecast

“Lost production from the storm combined with these current market conditions has limited our ability to build up natural gas inventories, and we expect that will keep prices higher in the short term than we had previously thought,” EIA Acting Administrator Steve Nalley said.