Natural Gas Price Fundamental Daily Forecast – Supported by LNG Demand, Capped by Easing Weather Forecasts

Natural gas futures are edging lower early Tuesday as a forecast change to milder-trending temperatures is weighing on demand. Prices moved higher early Monday as damage from Hurricane Delta over the weekend to liquefied natural gas (LNG) production facilities appeared to be minimal and forecasts called for temperatures moving in a colder direction. However, those gains were erased when new forecasts took out the cold and introduced warmer temperatures.

At 13:54 GMT, December natural gas is trading $3.224, down 0.047 or -1.44%.

Projected temperatures remain colder-than-normal for the period running Friday through October 22, but “this morning’s forecast, like yesterday afternoon’s modeling runs,” reduces gas-weighted heating demand in the outlook, the EBW analysts said.

Short-Term Weather Outlook

According to NatGasWeather for October 13 to October 19, “The northern U.S. will be mild with highs of 50s and 60s due to weather systems over the Northwest and Northeast. The Northwest system will track into the Midwest Wednesday where it will tap colder air to drop lows into the 20s and 30s. The rest of the U.S. will be comfortable to warm with highs of 70s and 80s besides hotter 90s over areas of California and the Southwest. A stronger cold shot will push into the Midwest and east-central U.S. late this week into next week with rain, snow, and chilly lows of teens to 40s for stronger national demand. Overall, national demand will be low through Thursday then increasing to high.”

IEA – Response to COVID-19 Crisis to Reshape Global Energy

Amid the deep demand destruction and uncertainty caused by the coronavirus pandemic, global energy demand is set to drop by 5% in 2020, with oil and gas investments falling by an estimated 18%, and the pain could linger into 2023 depending on whether the virus is controlled, according to the International Energy Agency (IEA).

Daily Forecast

We could see a choppy trade on Tuesday ahead of the midday weather reports. Additionally, differences in the U.S. and European weather models could also be the source of volatility. We may not see a solid trend develop in the market until the weather models align. Meanwhile, the market is likely to be supported by rising demand for LNG exports.

However, we may not see a breakout to the upside unless a combination of heating demand and LNG demand can make storage concerns go away.