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James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Thursday ahead of the regular session opening at 12:00 GMT and the release of the government’s weekly storage report at 14:30 GMT. On Wednesday, the market firmed for a second session shortly after the opening, but gains were quickly erased and prices plunged into the close as traders expressed concerns over weaker export demand and another large weekly storage injection.

At 07:27 GMT, July natural gas is trading $1.857, down $0.029 or -1.54%.

US Energy Information Administration Weekly Storage Report Estimates

Natural Gas Intelligence (NGI) is reporting that ahead of the release of the government data, a Bloomberg survey of three analysts produced a range of estimates from 99 Bcf to 126 Bcf, with a median of 103 Bcf. Reuters polled 16 analysts, who had the same range of estimates but arrived at a median of 106 Bcf. NGI projected a 110 Bcf build, which is on par with last year’s 110 Bcf injection but well above the five-year average build of 93 Bcf.

Working gas in storage was 2,503 Bcf as of Friday, May 15, 2020, according to EIA estimates. This represents a net increase of 81 Bcf from the previous week. Stocks were 779 Bcf higher than last year at this time and 407 Bcf above the five-year average of 2,096. At 2,503 Bcf, total working gas is within the five-year historical range.

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NGI Sees Bearish Problems with Liquefied Natural Gas

“Ongoing concerns related to U.S. liquefied natural gas (LNG) exports also remain a massive headwind for pricing. Although NGI data shows that the feed gas volumes for Wednesday were higher day/day, deliveries were still well off late-March highs at around 6.5 Bcf/d, and the outlook for summer remained rather bleak,” NGI said.

“More than 30 U.S. LNG cargoes have been canceled for June, and international prices are signaling that oversupply conditions will linger for a while, even when accounting for any increased demand in the wake of COVID-19,” NGI added.

Short-Term Weather Outlook

Weather models continued to warm, with the overnight data being “a touch hotter” for the June 5-7 period across the southern United States due to upper high pressure strengthening, according to NatGasWeather.

However, models still favor the upper ridge weakening June 8-11, and this is where the national pattern needs to be hotter, the firm said. “Again, the data isn’t quite as bearish as Friday’s data and needs close watching, as it wouldn’t take much hotter trends to look increasingly bullish.”

Daily Forecast

A bearish EIA storage report is likely to drive prices into the two main bottoms at $1.822 and $1.802. The selling pressure may even be strong enough to reach the upper $1.70’s area.

However, you have to be careful about shorting aggressively at new lows because speculative buyers may show up. They’re likely to be betting on the return of hotter temperatures.

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

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