Natural Gas Price Fundamental Daily Forecast – Rangebound Amid Freeport LNG Uncertainty

Natural gas futures are edging lower on Wednesday as traders shrugged off forecasts calling for colder weather and more heating demand next week than previous estimated. Nonetheless, worries that Freeport LNG would delay the restart of its liquefied natural gas (LNG) export plant in Texas continued to cap prices.

At 12:49 GMT, January natural gas futures are trading $6.303, down $0.092 or -1.44%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $19.77, up $0.25 or +1.25%.

Lack of Clarity from Freeport LNG Continues to Weigh on Prices

According to reports, Freeport LNG as of late Tuesday, had not submitted a request to resume service to the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA). This has led many market observers to believe that the plant will not return until December at the earliest.

Adding further to the confusion was a Bloomberg report from Monday that said the export facility had told LNG buyers it would likely cancel shipments scheduled for this month and December because of ongoing repair work and unsecured regulatory approval.

Natural Gas Intelligence (NGI) wrote overnight, “Without an updated timeline from Freeport LNG officials, the news spawned ongoing speculation among market participants that the facility’s return may not happen until early 2023. If this were to bear out, it would keep more gas at home, further fortify U.S. supplies and help offset concerns about meeting demand even if the Lower 48 winter proves harsh or exceptionally long.”

“From a raw fundamental perspective, a two-month delay in the 2.0 Bcf/d facility would equate to 120 Bcf – largely offsetting the 135 Bcf bullish weather shift over the past 10 days,” EBW Analytics Group analyst Eli Rubin said Tuesday.

Early EIA Weekly Storage Report Estimates

Thursday’s U.S. Energy Information Administration (EIA) weekly storage report is expected to show another relatively fat storage build.

NGI is reporting that early estimates for the week ended Nov. 11 submitted to Bloomberg ranged from 60 Bcf to 72 Bcf, with a median of 66 Bcf. Preliminary results of a Reuters’ poll landed at an average of 64 Bcf and spanned 51 Bcf to 78 Bcf.

These estimates compare with an injection of 23 Bcf a year earlier and a five-year average withdrawal of 5 Bcf.

Short-Term Outlook

We could see another day or two of sideways, rangebound trading until the release of Thursday’s EIA report.

Trying to predict when Freeport LNG will restart is very difficult and risky. But once the announcement is made, the jump in demand should trigger a strong upside breakout.

In the meantime, the weather forecasts and the storage report will guide the price action.