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Natural Gas Price Fundamental Daily Forecast – Supported by Tight EIA Storage Data, July Heat Expectations

By:
James Hyerczyk
Published: Jun 25, 2021, 10:28 UTC

Over the short-run, traders should watch for volatility due to the upcoming contract expiration and returning liquefied natural gas (LNG) demand.

Natural Gas

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Natural gas futures are inching higher early Friday following the release of a very tight government storage report that sparked an impressive reversal to the upside the previous session. While the government report may have fueled the early surge, traders are staying it was the return of heat to the forecast that actually led to the higher spike in prices.

At 09:59 GMT, September natural gas futures are trading $3.430, up $0.015 or +0.44%.

Energy Information Administration Weekly Storage Report

The latest EIA report confirmed the stronger demand with a modest 55 Bcf injection into storage. Traders are looking for a build in the low to mid-60s Bcf. Last year, the EIA recorded a 115 Bcf injection, and the five-year average injection stands at 83 Bcf.

Ahead of the report, Natural Gas Intelligence (NGI) reported that Reuters polled 17 analysts, whose estimates ranged from a build of 56 Bcf to 79 Bcf, with a median injection of 68 Bcf. A Bloomberg survey of 10 analysts produced a tighter range of estimates, with a median injection of 64 Bcf. NGI’s model predicted at 68 Bcf build.

Total working gas in storage as of June 18 stood at 2,482 Bcf, which is 513 Bcf below last year and 154 Bcf below the five-year average, according to the EIA.

Short-Term Weather Outlook

According to NatGasWeather for June 24 – June 30, “Hot high pressure continues over the West, Texas, and Plains with highs of upper 80s to 110s, including record breaking heat over the Northwest this weekend.

The Midwest and eastern U.S. will be comfortable for another couple days with highs of 70s to lower 80s as weather systems with showers sweep through.

The East will become very warm to hot this weekend into next week as high pressure builds in with highs of upper 80s to lower 90s to aid stronger national demand.

A new weather system will push into the Midwest mid-next week with/cooling. Overall, moderate national demand Thursday-Friday, then high this weekend into next week.

Daily Forecast

Bespoke Weather Services said the figure reflected “crazy tight” supply/demand balances, which it had expected. “How tight was the question.” As it turned out, the combination of low wind and low nuclear output last week accounted for more than Bespoke estimated.

The EIA figure would promote end-of-season storage levels under 3 Tcf if extrapolated forward, according to the firm. “Obviously, that is not going to happen, as next week’s number will not be nearly as tight, thanks to higher wind and more nuclear output. But it is easier now to see why prices have been on such a march higher.”

Over the short-run, traders should watch for volatility due to the upcoming contract expiration and returning liquefied natural gas (LNG) demand to possibly reduce weekly storage injections by as much as 10-15 Bcf per week, according to EBW Analytics Group.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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