Natural Gas Price Fundamental Daily Forecast – Surprise Triple-Digit EIA Build Will Send Prices Tumbling

Natural gas futures are edging higher shortly before the release of the government’s weekly storage report on Thursday. The market is also up for a second higher session following Tuesday’s record-setting sell-off as traders continue to assess the impact of Freeport LNG’s decision to remain off-line until at least September and perhaps into the end of the year.

At 12:57 GMT, August natural gas futures are trading $7.775, up $0.369 or +4.98%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $25.48, up $0.76 or +3.07%.

Short-Term Weather Forecast

According to NatGasWeather for June 16-22, “Hot high pressure continues over much of the interior US with highs of 90s to 100s, including highs into the upper-90s for Chicago and the Ohio Valley. Cooler exceptions continue across the Northwest, Northern Plains, and New England with highs of 60s to 80s as weather systems with showers and thunderstorms sweep through.

National demand will ease to seasonal levels this weekend as weather systems arrive over the Great Lakes, East, and Northwest, although still hot over the interior US with highs of 90s to 100s.

Overall very high national demand through Friday, easing to moderate-high this weekend, then back to high next week.”

US Energy Information Administration Weekly Storage Report

Today’s weekly EIA storage report, due to be released at 14:30 GMT, will cover the period ended June 10.

Early forecasts point to an injection in the low 90s, which would keep stocks about 14% below the five-year average.

Natural Gas Intelligence (NGI) is reporting that Bloomberg’s survey produced injection estimates that spanned 83 Bcf to 96 Bcf, with a median of 91 Bcf. A Wall Street Journal poll found an average injection expectation of 90 Bcf, and it also produced a range of 83 Bcf to 96 Bcf. Reuters’ poll landed at a median injection of 91 Bcf, with estimates ranging from 81 Bcf to 98 Bcf.

The estimates compare with an injection of 28 Bcf during the same week last year and a five-year average injection of 79 Bcf.

Daily Forecast

Traders are going to have to wait until next week to see if the Freeport issues impact storage immediately so we could see a limited response to this week’s EIA report. Of course, anything in the triple-digits will still be bearish. Anything under 90 is potentially bullish, but gains are likely to be limited because traders are anticipating a big build for the week-ending June 17.

Remember that feed gas that would have been headed to Freeport for export likely will be used domestically, including for injections into storage.

According to NGI, “Other American LNG facilities are maxed already and cannot absorb more. That means low supplies in the United States relative to overall demand – as the summer nears – are bound to get a boost, helping to balance the market.”