Natural Gas Price Fundamental Daily Forecast – Supported by EIA Draw, LNG Demand, Output Drop

Natural gas futures are trading higher late in the session on Thursday after reversing earlier weakness. The catalysts behind the market’s strength are a bigger than expected storage draw in today’s government report, an increase in gas flows to liquefied natural gas (LNG) export plants and a drop in output as extreme cold from North Dakota to Texas caused oil and gas wells to freeze.

At 19:40 GMT, March natural gas futures are trading $5.792, up $0.172 or +3.06%. The United States Natural Gas Fund ETF (UNG) is at $20.90, up $1.43 or +7.34%.

EIA Reports Draw Smaller Than 5-Year Average

The U.S. Energy Information Administration (EIA) reported a draw of 50 billion cubic feet (Bcf) of gas from storage during the week-ended December 9, exceeding the 45 Bcf decline analysts forecast in a Reuters poll and compared with a decrease of 83 Bcf in the same week last year and a five-year (2017-2021) average decline of 93 Bcf.

Last week’s decrease cut stockpiles to 3.412 trillion cubic feet (Tcf), or 0.4% below the five-year average for this time of year.

Ahead of the report, Natural Gas Intelligence (NGI) reported a Reuters survey of 10 analysts produced a median 47 Bcf withdrawal estimate and a range from minus 33 Bcf to minus 54 Bcf. A survey of 9 analysts at Bloomberg produced a median of 51 Bcf withdrawal estimate and a range from minus 36 Bcf to minus 60 Bcf. The Wall Street Journal’s survey ranged from withdrawals of 36 Bcf to 53 Bcf, with an average estimate for a 46 Bcf pull. NGI modeled a 41 Bcf withdrawal for the upcoming report.

LNG Exports Rise

Reuters is reporting that despite the Freeport shutdown, the amount of gas flowing to U.S. LNG export plants hit 13.0 Bcfd on Thursday, the most since June 4 – four days before Freeport shut. That is because the nation’s six other big export plants were operating near full capacity.

Refinitiv Reports Daily Output Drop

Data provider Refinitiv said daily output was on track to drop about 3.4 Bcfd over the past three days to a preliminary two-month low of 97.2 Bcfd on Thursday as freezing weather blankets parts of Texas, Oklahoma and North Dakota, causing well freeze-offs.

On a weekly basis, however, average gas output in the U.S. Lower 48 states rose to 99.6 Bcfd so far in December, up from a monthly record of 99.5 Bcfd in November.

Short-Term Outlook

The main trend is down according to the daily swing chart. A trade through $6.192 will change the main trend to up. A move through $4.831 will signal a resumption of the downtrend.

The nearest support is a retracement zone at $5.512 – $5.351. The closest resistance is a retracement zone at $5.865 to $6.113.

An upside bias could develop on a breakout over $6.192, however, gains are likely to be limited by a major retracement zone at $6.384 to $6.750.