Natural Gas Price Fundamental Daily Forecast – Rising Production, Flat Demand Weighing on Prices

U.S. natural gas futures remain under pressure early Tuesday after prices fell to their lowest level since April 2016 on Monday. Traders are blaming forecasts for mild weather combined with a steady rise in production on the weakness.

At 0751 GMT, December Natural Gas futures are trading $3.019, up $0.01 or +0.03%.

Looking at November as the front-month futures contract, the market is trading at its lowest level since August 9. The December futures contract is trading at a multi-month low.

With the U.S. split diagonally by cool and mild temperatures to the West and warm high pressure to the East, national demand is expected to be low over the near-term.

According to natgasweather.com, “Overall, it’s (the weather pattern) a somewhat bearish set up as we wait on colder weather systems to finally arrive over the Great Lakes and Northeast, which still won’t be for a little while longer.”

Forecast

The expected rise in natural gas production is a cause of concern for traders at this time. Essentially, rising production and flat demand are weighing on prices.

Production in the lower 48 U.S. states rose to an average 73.9 billion cubic feet per day (bcfd) over the past 30 days, from 70.2 bcfd a year earlier and just off the 74.1 bcfd seen during the same period in 2015, when output for the year was at a record high.

Thompson Reuters is projecting U.S. gas consumption will slip to 71.3 bcfd this week and the next, as against 74.3 bcfd last week. This indicates there are no heating degree days and the warming weather is not going to result in a demand surge.

Additionally, meteorologists are predicting temperatures would be warmer than usual in November and December, colder than usual in January and near normal in February.

The trend is down and expected to continue over the near-term as sellers continue to probe the downside for support. In the meantime, we’re still vulnerable to periodic short-covering rallies because of oversold conditions, but these are likely to be shorting opportunities.