Natural Gas Price Fundamental Daily Forecast – Sideways-to-Lower Unless Heat, LNG Demand Returns

Natural gas futures are edging higher on Wednesday following a steep sell-off the previous session. The catalysts behind the selling are a mixed weather outlook and new data suggesting both increased production and demand for U.S. liquefied natural gas (LNG). Both factors add up to uncertainty and when there is uncertainty, investors tend to sell.

At 11:49 GMT, October natural gas is trading $2.421, up $0.021 or +0.87%.

Lower spot gas prices also weighed on futures prices as weather turned cooler-than-normal across much of the country. Meanwhile, excessive heat and wildfire risks in the West continued to wreak havoc on the power grid with more forced power outages planned for more than 20 California counties.

Short-Term Weather Outlook

According to NatGasWeather for September 9 to September 14, “Strong early season cool shots continue across the Rockies and Plains with rain, snow and highs of only 50s to 70s, locally 40s. Cooling will also push into Northern Texas mid-week with highs of 50s to 70s. The East will be warm to very warm with highs of 70s to lower 90s, while hot over the West with highs of 90s and 110s, hottest California. Temperatures will warm back into the 60s to lower 80s over the Midwest and central U.S. late in the week as cool shots fade.”

LNG Feed Gas Developments

Genscape is estimating that total U.S. LNG feed gas demand gathered momentum over the long Labor Day weekend, as markets had anticipated when prices advanced on Friday. LNG levels by Tuesday had returned to the levels observed prior to the shut-ins forced by former Hurricane Laura’s landfall over the Gulf Coast in late August.

Meanwhile, EBW Analytics Group said one important wild card for markets this week is how much longer Cameron will remain shut down. “As a result of the extended shut-down of Sabine Pass, Cheniere has built up a large backlog of cargoes to be loaded later this month,” the EBW analysts said. “While the timing of the ramp-up is still uncertain, during the next five to seven days, feed gas flows could increase by as much as 3-4 Bcf/d and stay high through the end of September.”

Finally, over recent days, production has also surged. “Rebounding production, if sustained, may weigh on natural gas futures,” EBW analysts said.

Daily Forecast

It’s getting hard to generate any renewed upside momentum with cash prices falling, temperatures cooling and LNG supply/demand off-setting each other.

This summer’s rally was supported by rolling heat waves that lead to steady demand. Renewed demand for LNG also underpinned prices then the hurricane hit LNG demand and the weather turned cooler. Prices are likely to trade sideways to lower over the near-term unless there is a late summer heat wave and a jump in LNG demand.

For a look at all of today’s economic events, check out our economic calendar.