Natural Gas Price Fundamental Daily Forecast – Reduced Production, Tight Inventories Driving Upside Momentum

Natural gas futures are inching lower early Friday after hitting a multi-year high the previous session. Upside momentum remains strong despite prices hovering just below a seven-year high. The catalysts behind this week’s rally are reduced production due to the lingering impact of Hurricane Ida and the latest government storage report that confirmed a tight supply/demand balance.

At 07:31 GMT, December natural gas futures are trading $5.143, down $0.015 or -0.29%.

US Energy Information Administration Weekly Storage Report

Following a weak opening on Thursday, natural gas futures reversed to the upside, posting a new high for the week in the process. The move was driven after the U.S. Energy Information Administration (EIA) reported that domestic supplies of natural gas edged up by 52 billion cubic feet (Bcf) for the week ended September 3. That was much higher than most estimates.

The five-year average increase was 65 Bcf.

Major surveys pointed toward a below-average build in the mid-20s 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. Natural Gas Intelligence (NGI) estimated a 38 Bcf injection.

Total stocks now stand at 2.923 trillion cubic feet (TCF), down 592 Bcf from a year ago and 235 Bcf below the five-year average, the government said.

Short-Term Weather Forecast

According to NatGasWeather for September 9-15, “The West, Plains, and Texas remain very warm to hot with highs of upper 80s to 100s due to strong high pressure. The Midwest and Northeast are comfortable with highs of upper 60s to 80s as early fall-like fronts sweep through with showers.

Heavy rains and gusty winds will spread across Florida and portions of the Southeast the next couple days as a weak tropical system tracks through.

Much of the U.S. will warm above normal this weekend and next week with highs of 70-80s across the northern U.S. and 80s-90s across the southern U.S.

Overall, national demand will be low across the northern U.S. but moderate to high across the western U.S. into Texas.

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.

Additionally, Bespoke Weather Services said, cooling demand is holding strong and is expected to carry through most of September, and perhaps longer, owing to a La Nina base state.

“We need as much gas in storage as we can get,” Bespoke added.

Longer-term, the 2022 Old Farmer’s Almanac, released a couple of days ago, predicted “bone-chilling, below-average temperatures” across most of the United States. “This coming winter could well be one of the longest and coldest that we’ve seen in years,” said the Almanac’s editor, Janice Stillman.

Traders are likely to follow a “buy the dip” strategy throughout the Fall and Winter.