Natural Gas Price Fundamental Daily Forecast – Specs Betting on More Demand from Early Freeport LNG Recovery

Natural gas futures are trading sharply higher on Thursday, shortly before the release of the weekly government storage report. Buyers are being motivated by a second straight drop in daily output and new forecasts calling for more demand this week than previously expected.

The market is rallying despite forecasts for less hot weather through mid-August and the ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter.

At 12:25 GMT, September natural gas futures are trading $8.449, up $0.247 or +3.01%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $28.39, up $1.43 or +5.30%.

Short-Term Weather Outlook

According to NatGasWeather for August 11-17, “Weather systems will track across the Great Lakes, Ohio Valley, and East with showers and highs of 60s to 80s. Most of the rest of the US will be under hot high pressure with highs of upper 80s to 100s.

Slightly cooler exceptions will occur across East Texas and the South today with highs of mid-80s due to heavy showers.

Overall, national demand easing to moderate to high.”

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) will release its weekly storage report at 14:30 GMT. It is expected to show a build of 40 Bcf for the week-ending August 5.

Natural Gas Intelligence (NGI) is reporting that surveys by Bloomberg, Reuters and the Wall Street Journal all produced a range of injection estimates from 30 Bcf to 44 Bcf. Each of the Bloomberg and Reuters polls resulted in a median injection of 40 Bcf, while the Wall Street Journal poll averaged at a 39 Bcf build.

The EIA recorded a 44 Bcf injection into storage during the similar week last year, while the five-year average is a 45 Bcf build.

Daily Forecast

Freeport LNG’s decision to retract the force majeure it initially declared after the explosion in June, a development that could cost its buyers billions of dollar in losses, is the catalyst behind today’s early strength.

Although the news did nothing to speed up the facilities recovery from the incident or change its planned restart date, some bullish traders are reading into the move and betting on an earlier than expected restart at the plant.

Het Shah of Analytix.AI said, “My assumption is that the retraction of the forced majeure filing (and blaming human error), limits the investigation and lets them start up soon. So I believe the market is putting more confidence in the early-October start-up.”

The faster Freeport LNG returns to service the less natural gas that will be available for winter heating needs. This is bullish news because the U.S. is currently operating at a deficit to the five-year average. If Freeport starts processing natural gas in October, the shortage could get worse ahead of the start of the winter heating season.