Natural Gas Price Fundamental Daily Forecast – Supported by Solid LNG Exports, Tightening Balances

Natural gas futures edged higher on Wednesday for a second straight session as traders braced for the expiration of the December futures contract. The market was supported by strong demand for U.S. liquefied natural gas (LNG) and a weekly government storage report that highlighted tightening balances.

On Wednesday, January natural gas futures settled at $5.114, up 0.079 or +1.57%.

Steady LNG Demand Underpinning Prices

Despite somewhat bearish weather conditions, the market has been well-supported throughout the month by robust demand from Asia and Europe for U.S. liquefied natural gas (LNG) as these regions brace for the start of winter.

According to Natural Gas Intelligence (NGI), LNG feed gas volumes held above 11 Bcf throughout the abbreviated trading week – within striking distance of record levels around 12 Bcf.

Short-Term Weather Outlook

NGI reported that Bespoke Weather Services noted that near-term domestic weather-driven heating demand forecasts looked light Wednesday, given expectations for seasonally mild temperatures early next month. “We do fell the warmer path is the correct one…into the first half of December, thanks to a lack of high latitude blocking on either side of the continent.”

US Energy Information Administration Weekly Storage Report

The EIA said utilities pulled 21 Bcf of gas from storage during the week-ended November 19, which was the first withdrawal of the 2021-2022 winter season. That was in line with the 22 Bcf draw a consensus of analysts forecast.

Last week’s withdrawal cut stockpiles to 3.623 trillion cubic feet (tcf) for this time of year.

Ahead of today’s EIA storage report, NGI’s model predicted a 26 Bcf withdrawal from stockpiles, which would mark the season’s first net pull on Lower 48 inventories.

NGI also reported a Reuters poll found estimates that ranged from withdrawals of 16 Bcf to 31 Bcf, with a median of 22 Bcf. Early results of a Bloomberg survey ranged from pulls of 22 Bcf to 26 Bcf, creating a median of 24 Bcf. The Wall Street Journal’s poll found withdrawal estimates of 11 Bcf to 25 Bcf, with an average of 20 Bcf.

Last year, the EIA recorded an 11 Bcf pull for the similar week, and the five-year average is a 44 Bcf withdrawal.

Short-Term Outlook

The main range is $4.009 to $6.667. The market is currently trading inside its retracement zone at $5.024 to $5.338, making $5.024 support and $5.338 resistance.

Look for an upside bias to develop on a sustained move over $5.024 with the first upside target $5.338. Overtaking this level could trigger a further rally into the main top at $5.480. Taking out this level will change the main trend to up.

The downside bias will resume on a sustained move under $5.024. This could lead to a retest of the weekly low at $4.736. This is a potential trigger point for an acceleration to the downside.