Natural Gas Price Fundamental Daily Forecast – Slight Pick-up in Demand as Power Returns to Florida

Natural gas futures recovered for a second day on Tuesday as investors continued to take profits and adjust positions in reaction to the impact of Hurricane Irma. Last week, traders shorted natural gas in anticipation of prolonged power outages in Florida which would have led to a drop in demand.

I rode out the hurricane in Fort Myers, Florida and I can assure you, the power is back on. Otherwise, you would not be reading this report. There have been periodic outages like the one I experienced today, but for the most part, things are slowly returning to normal.

November Natural Gas futures settled at $3.067, up $0.048 or +1.59%.

Forecast

While investors are adjusting their positions to the easing of worries over energy demand, they are slowly facing the reality that the summer cooling season is coming to an end. Unfortunately, hurricane season doesn’t end for me until November 30.

With the fall season set to begin in the U.S. on September 22, demand for natural gas should start to taper off because of the onset of cooler temperatures. Therefore, I think it’s safe to say that demand has peaked for now.

According to the U.S. Energy Information Administration, total natural gas in storage currently stands at 3.220 trillion cubic feet. This is around 6.2% lower than levels at this time a year ago and mostly in line with the five-year average for this time of year.

Thursday’s weekly storage report is expected to show a build of about 78 billion cubic feet. This is a little high, probably because Florida was under a state of evacuation last week as the hurricane approached and the air conditioners weren’t running.

Last week, the storage gain was 65 billion cubic feet. Last year, the build was 62 billion cubic feet. The five year average is 63 billion cubic feet.

So we can conclude that the impact of the hurricane may have added between 9 and 20 billion cubic feet, given the 72 to 83 billion cubic feet range for the week-ending September 8.

Despite the bearish outlook, the chart indicates the trend is still up. We may find out how strong the buying is if the market nears the last top at $3.152. Taking this price out will indicate the buying is getting stronger. A failure to overtake this level will likely lead to a sideways to lower trade over the short-run.