Natural Gas Price Fundamental Daily Forecast – Specs Betting on Early Cooling Demand to Widen Storage Deficit

Natural gas is trading nearly 6% higher at the mid-session on Monday as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants rose to a seven week high, causing some in the market to worry about the amount of gas available for U.S. stockpiles.

At 17:00 GMT, July natural gas is at $8.655, up $0.477 or +5.83%. The United States Natural Gas Fund ETF (UNG) is trading $29.34, up $1.61 or +5.81%.

LNG Exports Rise to 7 Week High

The average amount of gas flowing to U.S. LNG export plant has risen to 12.4 bcfd so far in May from 12.2 bcfd in April. That compares with a monthly record of 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG, according to Reuters.

Refinitiv Average Gas Output, Average Gas Demand

Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 95.0 bcfd so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.

Refinitiv projected average U.S. gas demand, including exports, would ease from 89.4 bcfd this week to 88.0 bcfd next week.

Specs Increase Bullish Bets

Last week, speculators increased their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for the first time in five weeks to their highest since early May, according to the U.S. Commodity Futures Trading Commission’s (CFTC) Commitments of Traders report.

Short-Term Weather Forecast

According to NatGasWeather for May 23-29, “A cooler than normal weather system lingers over the interior US with highs of 50s to 70s, including comfortable highs of 70s and 80s over Texas and the South.

Hot conditions are now confined to the Southwest, California, and parts of Florida with highs into the 90s. The southern and eastern US will warm into the 80s and 90s late in the week as high pressure strengthens, although still quite comfortable over most of the rest of the US besides the hotter Southwest.

Overall, lighter national demand this week due to less coverage of highs into the 90s.

Daily Outlook

Technically speaking, the main trend is up. The uptrend resumed early Monday when buyers took out the previous main top at $8.64. If this move creates enough upside momentum, the market could spike into the major top at $9.052.

On the downside, taking out $7.943 will change the main trend to down, but don’t expect too much of a follow-through break with short-term support coming in at $7.581 to $7.330.

Fundamentally, the jump in speculative buyers last week indicates that traders are betting on a combination of low output and strong demand to continue to feed the storage deficit.

Hot weather the first week of June could be the catalyst that sends prices skyrocketing toward $10.