Natural Gas Price Fundamental Daily Forecast – Series of Big Injections Coming That Will Shrink Storage Deficit

Natural gas futures are trading slightly higher on Wednesday after rebounding from early session weakness. The price action suggests the buying may be greater than the selling at current price levels, probably due to oversold technical conditions. Bearish traders could also be reluctant to short into weakness this close to major support at $2.578 to $2.574.

At 11:16 GMT, June natural gas futures are trading $2.622, up $0.005 or +0.19%.

Short-Term Weather Outlook

According to NatGasWeather for April 17 to April 23, “Warming conditions will spread across the Great Lakes, Ohio Valley, and East the next few days with highs of 60s & 70s gaining ground. The southern US will be very warm with highs of 70s to 90s. The Southwest into the central US will be unsettled as weather systems tracks through with showers, although with only modest cooling. One of these systems will rapidly strengthen and sweep across the east-central and eastern US late this week through the weekend with heavy showers, but with only minor cooling. Overall, national demand will be low.”

Changes in Forecast Coming?

“If current weather forecasts hold, the past few days could prove to be an important turning point for natural gas futures,” according to EBW Analytics Group. “Prior to this past weekend, temperatures in Week 2 had been expected to be cool enough to potentially push prices back up, at least for a short-time period. The weekend forecast shift, however, most likely negates this scenario,” the firm said.

“If current forecasts verify, however, the resulting drop-off in weather-driven demand is likely to pull natural gas prices down further, even if Sabine Pass returns to full capacity,” EBW CEO Andy Weissman said.

Storage Deficit Likely to Shrink

Even if cooler temperatures return, buyers are not likely to overcome strong headwinds which will likely prevent a significant rally at any time during the next few weeks. This is because “monster injections” are expected the next two weeks, with a series of 100-plus Bcf injections to follow.

Daily Forecast

Oversold technical conditions could encourage profit-taking and position-squaring, but national demand is not expected to be significant enough to lead to a prolonged rally. In fact, any reasonable near-term strength is likely to attract further short-selling.

We’ve hit the time of the year when bullish traders will have to wait for the return of hot temperatures in order to generate any meaningful upside action.

NatGasWeather puts it this way, “There will be weather systems that bring widespread heavy showers, but with only slight cooling,” the forecaster said. “In addition, we are now reaching the time of the year when gains in heating degree days (HDD) often come with the loss of cooling degree days, and vice versa. The net result will be larger-than-normal weekly injections that are currently lining up at least five to six weeks deep – with all of them likely to print at least 85 Bcf, with most well over 100 Bcf.”