Natural Gas Price Fundamental Daily Forecast – Traders Bracing for Another 100+ Bcf EIA Storage Build

Natural gas futures are edging higher early Thursday on short-covering and position-squaring ahead of today’s U.S. government weekly storage report. Bearish news has dominated the trade this week and several analysts fear the down trend could continue for weeks and months with new weather forecasts predicting a mild winter.

At 10:59 GMT, December natural gas futures are trading $5.982, up $0.054 or +0.91%. On Wednesday, the United States Natural Gas Fund ETF (UNG) settled at $19.05, down $0.99 or -4.94%

This Week so Far….

Natural gas prices fell about 5% to a three-month low on Wednesday. That price decline, which is part of an eight-week trend, has put the futures contract down about 16% since last week’s close.

The catalysts behind the selling pressure are record output levels and reduced liquefied natural gas (LNG) exports. Both events have allowed utilities to rebuild storage levels with intense weekly gas injections. Over the past four weeks, the gas market has injected 460 Bcf into storage and dramatically trimmed the deficit to both year-ago and five-year average levels.

Refinitiv Supply/Demand Outlook Bearish

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.6 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.

Meanwhile, with milder weather coming, Refinitiv projected average U.S. gas demand, including exports, would fall from 100.7 bcfd this week to 96.7 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Tuesday.

Short-Term Weather Outlook

According to NatGasWeather for October 20-26, “A chilly early season weather system will continue across the Great Lakes & East today with rain and snow showers and chilly lows of 20s to 40s, highs of 40s and 50s.

The West and far South will be nice to warm with highs of 60s to 80s. The eastern and southern U.S. will warm into the 60s to 80s Friday to Tuesday, while the West cools and becomes unsettled with highs of 40s-60s. Overall, moderate national demand today, then light.

US Energy Information Administration Weekly Storage Report

NatGasWeather says survey averages for the morning EIA storage report suggest a build of 102-105 Bcf, larger than the 5-year average of 73 Bcf. Temperatures were near to warmer than normal over most of the US besides slightly cool across the Great Lakes and Ohio Valley. We expect a build of 105 Bcf, and it close, will improve deficits from -221 to near -190 Bcf.

Natural Gas Intelligence (NGI) predicts that today’s EIA report, due to be released at 14:30 GMT, will show another 100+ Bcf addition to inventories for the week-ending October 14.

According to NGI, Reuters polled 13 analysts, whose estimates ranged from injections of 95 Bcf to 118 Bcf, with a median forecast of 106 Bcf. Additionally, both Bloomberg and the Wall Street Journal had a tighter range of projections, with a median injection of 103 Bcf and an average injection of 102 Bcf, respectively.

A build close to these levels would easily surpass the 91 Bcf injection recorded in the year-earlier period, as well as the five-year average of 73 Bcf.

Short-Term Outlook

The fundamentals are bearish and another 100+ Bcf storage build from the EIA could help extend the sell-off. An injection of 105 Bcf or greater would be extremely bearish and could spike prices lower.

However, a spike lower could capitulate the move, leading to a possible short-covering rally late in the session, especially since today may be the last 100 Bcf injection of the season.