Natural Gas Price Fundamental Daily Forecast – Traders Facing Low Demand Issues Ahead of EIA Storage Report

Natural gas futures showed little change on Wednesday after an earlier price spike failed to draw enough buyers to extend the move. The price action was a little surprising as flows to liquefied natural gas (LNG) export terminals increased at the same time output declined.

Traders said the weakness was ultimately fueled by expectations of overall demand loss over the next two weeks as homes and businesses turn down their heaters with the temperatures expected to turn milder.

At 19:41 GMT, May natural gas is trading $1.722, down $0.007 or -0.46%.

The recent plunge in prices to a 24-year low can’t all be blamed on the coronavirus pandemic. Prices were trading close to their lowest levels in years as record production and one of the mildest winters on record were already weighing on demand and prices.

Utilities had been storing gas all along, making fuel shortages and price spikes unlikely. Furthermore, the major short-sellers never budged on rallies. There were no massive short-squeezes despite huge short open interest in the futures markets. Bearish traders actually embraced rallies because they gave them fresh opportunities to short the market at better prices.

Short-Term Weather Outlook

According to NatGasWeather for March 25-31, “Warm conditions will expand to include most of the US the next few days apart from portions of the cooler West. There will be areas of showers today over the Mid-Atlantic, while a cooler system brings rain and snow showers to the West. Highs will be very warm across the southern US with 70s and 80s, locally 90s, while mild across the Midwest to Northeast with highs of upper 50s to 60s. Weak cool shots will impact the far northern US next week for a minor increase in national demand.”

Short-Term Outlook

On Thursday, the U.S. Energy Information Administration (EIA) will report its weekly storage stats. Traders are pricing in a 30 billion cubic feet (Bcf) decline for the week-ending March 20.

Last week, the EIA reported that domestic supplies of natural gas fell by 9 billion cubic feet for the week-ended March 13. This was slightly above the forecasts.

Going into this Thursday’s report, total stocks stand at 2.034 trillion cubic feet (TCF), up 878 Bcf from a year ago, and 281 Bcf above the five-year average.