Natural Gas Price Fundamental Daily Forecast – Supported by Potential Rail Strike Ahead of EIA Report

Natural gas futures are testing a three-month high early Wednesday as worries of a possible rail strike offset forecasts calling for a drop in heating demand amid forecasts predicting milder than normal temperatures.

Traders are also awaiting the release of the weekly government storage report. It is coming out a day earlier than normal because of the Thanksgiving holiday on Thursday.

At 12:30 GMT, January natural gas futures are trading $7.860, up $0.454 or +6.13%. On Tuesday, the United States Natural Gas Fund ETF (UNG) settled at $22.85, up $1.06 or +4.87%.

Speculators are also betting on the combination of Russian supply cuts to Europe and Freeport LNG’s return in December to boost prices.

Potential Rail Strike Spiking Prices Higher

Reports of a potential rail strike that broke on Monday have helped launch the latest surge in natural gas prices. According to Natural Gas Intelligence (NGI), barring a labor agreement between management and unions by December 8, a railway worker walkout could follow, a development that would disrupt coal deliveries. This would force users to shift to natural gas for their heating needs.

The Schork Report’s analysts said a hit to coal would “generate increased demand for natural gas as the start of the heating season.”

Weather to Trend ‘A Little Warmer’

NatGasWeather said updated forecasts on Tuesday trended “a little warmer” for early December, particularly in the East.

Still, there “will be brief bouts of stronger demand across the Midwest and Northeast to start December” and “frigid air is expected into the West and northern Plains Nov. 29 – Dec.7, the first said.

U.S. Energy Information Administration Weekly Storage Report

Today’s weekly EIA storage report will not only be released a day earlier, but also at a later time – 17:00 GMT.

According to NGI, estimates for the week ended Nov. 18 submitted to Reuters, ranged from withdrawals of 65 Bcf to 111 Bcf, with a median decrease of 86 Bcf.

Bloomberg’s poll also found a median withdrawal estimate of 86 Bcf. Predictions ran from pulls of 74 Bcf to 111 Bcf. The Wall Street Journal’s survey landed at an average pull of 89 Bcf. Estimates spanned decreases of 81 Bcf to 111 Bcf.

NGI predicted a pull of 65 Bcf. That compares with a decline of 14 Bcf in the comparable week of 2021 and a five-year average decrease of 48 Bcf.

Daily Forecast

We’re in a news driven market and that news is the potential rail strike that would disrupt coal shipments leading to greater heating demand for natural gas. This story is likely to offset forecasts calling for warmer temperatures. The EIA report is expected to show withdrawals higher than the five-year average so this could be supportive. A miss to the downside, however, will likely be shrugged off by traders.