Natural Gas Price Fundamental Daily Forecast – Strong Production, Mild Temps Push Prices into Major Support

Natural gas futures are trading sharply lower on Tuesday as strong production and moderate temperatures outweigh the potentially bullish impact of rising demand for U.S. exports of liquefied natural gas (LNG).

The reliable Natural Gas Intelligence (NGI) Spot Gas Indicator is also losing looking weak as “Comfortable weather permeated most of the Lower 48 to start the week, spurring relatively little heating or cooling demand.”

At 14:06 GMT, December natural gas futures are trading $5.205, down $0.222 or -4.09%.

‘Futures Market Waiting for More Impressive Cold’ ~ Bespoke

The latest forecasts from Bespoke Weather Services cited modest gas-weighted degree day expectations through mid-November. This has futures traders waiting for more impressive cold to develop.

“The modeling still advertises a return to a blocky pattern, one which could deliver some cold as we head into late month, but we have seen this modeled for a while now with no material gains in demand showing up,” Bespoke said. “It is unclear if there is simply a model bias toward showing too much cold potential a couple of weeks out, or if they simply were too quick on the trigger.”

Production Estimates Hover Near 2021 Highs

Beyond weather, production estimates on Monday hovered near 95 Bcf and around 2021 highs, NGI reported.

RBN Energy LLC analyst Sheetal Nasta noted that private companies are responding to strong demand in 2021 overall – and expectations for more to come this winter.

While sustained production growth remains a wildcard, “U.S. natural gas supply is primed for growth, and the Lower 48 supply/demand balance the most bullish it has been in years,” Nasta said. “On top of that, exports are very strong and poised for growth, with international prices setting records.”

LNG feed gas volumes climbed above 11 Bcf Monday, as export destinations in Asia and Europe continued to call for more U.S. supplies of the super-chilled fuel as winter approaches, NGI reported.

Energy Information Administration Storage Report Due Wednesday

The U.S. Energy Information Administration (EIA) storage report is slated for release Wednesday, a day earlier than usual due to the Veterans Day holiday on Thursday. Traders are looking for a modest build.

NGI forecasted a build of 15 Bcf. Bespoke’s estimate landed at the same figure. For the similar week last year, EIA reported an injection of 2 Bcf. The five-year average is 25 Bcf.

Short-Term Outlook

December natural gas futures are currently testing a major support zone at $5.269 – $4.956. This area stopped the selling at $5.070 on October 19 and at $5.116 on November 1.

If this area of support fails, prices are vulnerable to a steep sell-off under $4.879. Weak longs will likely bail out if this price is taken out, but stronger buyers may be waiting for a good price under this level. So while the overall picture will look bearish on the charts, prices will appear to be relatively cheap for those looking for a bullish weather market later this winter.