Natural Gas Price Fundamental Daily Forecast – Traders Bracing for EIA Storage Report

Natural gas futures are trading lower early Thursday, following yesterday’s sell-off and ahead of today’s U.S. Energy Information Administration’s (EIA) weekly storage report. The report is expected to show a build which falls in line with the five-year average.

At 0826 GMT, October Natural Gas futures are trading $2.935, down $0.009 or -0.31%.

Bullish traders appear to be taking a breather ahead of the report as they react to falling spot prices. Cooler weather this week is responsible for this. A bullish developing weather pattern for the last week in August and the first week in September is helping to provide limited support for the deferred November to March winter strip.

Ahead of the EIA report, data shows that U.S. demand fell to 76.9 Bcf Wednesday, a drop of 1.1 Bcf on day as a result of 1.2 Bcf drop in power burn day on day in the Southeast, Southwest and Texas region. This decline reflects the drop in average temperatures this week.

Next week when the heat starts to return, the power burn is estimated to average 35.3 Bcf/d over the next seven days, according to S&P Global Platts Analytics. They are also saying that over the next seven days, demand is projected to average 78.5 Bcf/d. Platts is basing this forecast on the National Weather Service forecast which is calling for a likelihood of above-normal temperatures for much of the country.

Forecast

The direction of the market today will be largely determined by the EIA weekly storage report. Reuters has injection estimates ranging between 41 Bcf and 55 Bcf, and a median of 48 Bcf. A Bloomberg survey shows projections ranging between 40 Bcf and 55 Bcf, with an average of 49 Bcf and a median of 50 Bcf.

On the high side of estimates, Kyle Cooper of IAF Advisors expects a 54 Bcf injection. The ICE Exchange futures contract settled at a 50 Bcf build.

My estimate is for a build of 47 Bcf. This is slightly below the five-year average build of about 52 Bcf, but up 19 Bcf from the 33 Bcf announced for the week-ending August 10.

On the daily chart, we’re going to be watching the price action at $2.936. This price seems to be controlling the direction this week. If the report comes in below expectations then buyers may make a run at $2.974 to $2.979. If the report is bearish then look for sellers to attack $2.898.