Natural Gas Price Fundamental Daily Forecast – Trop Storm Nicole Expected to Offset Wintry Weather Demand

Natural gas futures finished lower on Wednesday on forecasts for less-cold weather in late November amid continued volatility. On Monday, the market hit a one-month high, but only two days later, it was testing a one-week low.

Besides the cooler weather expectations, traders were also reacting to a powerful tropical storm approaching the Southeast. It is expected to cause power outages and consequently lower demand for a wide region.

Traders are also bracing for another fat storage increase on Thursday and the delayed return of a key export facility.

On Wednesday, December natural gas settled at $5.865, down $0.273 or -4.45%. The United States Natural Gas Fund ETF (UNG) closed at $19.16, down $1.04 or -5.15%.

Mixed Weather Pattern Due to Tropical Storm Nicole

“Looming cold fronts and flat production this week around 99 Bcf/d favored bulls,” NatGasWeather noted, “with forecasts Wednesday showing a substantial shift toward wintry weather beginning this weekend and extending through the current trading week.”

This forecast is bullish on paper but tropical storm Nicole is getting in the way. It is packing powerful enough winds to galvanize emergency declarations and forecasts for lost power and substantially diminish near-term gas demand through the current trading week, Natural Gas Intelligence (NGI wrote.

Needs Stronger LNG Demand to Form Bottom

Natural gas may have bottomed at $5.345 on October 24, but the current technical picture suggests it may need to form a better support base before moving higher. Without a good foundation, prices could continue to weaken.

It’s going to need a catalyst to form the support base. One such catalyst is strong heating demand. The other is greater demand from liquefied natural gas (LNG) facilities.

At this time, the return to service of the Freeport LNG export facility in Texas, slated for this month, remained in question Wednesday. After a protracted outage dating to a June fire, the Texas LNG export facility had yet to confirm the status of needed regulatory approvals to reopen, NGI wrote.

When it does reopen, Freeport could pull about 2.0 Bcf/d of natural gas from domestic circulation to meet export demand. But if that does not happen this month, U.S. demand would prove lighter than expected and supplies could further swell in the near term, adding to price pressure, Goldman Sachs analyst Samantha Dart said.

Looking Ahead to Thursday’s Government Storage Report

Traders are looking for another robust build with Thursday’s inventory data. NGI is predicting a build of 68 Bcf. The estimate compares with a five-year average build of 20 Bcf. In the comparable week of 2021, EIA printed a 15 Bcf increase.