Natural Gas Price Fundamental Daily Forecast – Underpinned as Output Concerns Outweigh Demand Worries

Natural gas futures are edging higher on Friday, following through after yesterday’s dramatic reversal to the upside. The rally caught short-sellers by surprise, forcing a massive intraday short-covering rally.

Many traders went short as Hurricane Laura hit a key natural gas export terminal when it slammed the Gulf Coast Wednesday night. Renewed worries about a recovery in liquefied natural gas (LNG) demand also drew the attention of bearish traders. However, bullish traders were able to fend off the bears, sending prices higher.

At 11:52 GMT, October Natural Gas is trading $2.714, up 0.004 or +0.15%.

Bespoke Weather Services, noting the sell-off ahead of the storm on Wednesday, said “prices – just as they have been doing lately after any little dip – roared back, regaining the sell-off and much more.”

Meanwhile, the government reported an injection into natural gas storage inventories that was right in line with the consensus but below the year-ago and five-year average builds.

U.S. Energy Information Administration Weekly Storage Report

U.S. natural gas stocks increased by 45 Bcf the week-ending August 21.

Ahead of the report, Natural Gas Intelligence (NGI) reported that a Bloomberg survey as of Wednesday showed injection estimates ranging from 39 Bcf to 58 Bcf, with a median of 44 Bcf. A Wall Street Journal poll had the same range and arrived at an average 46 Bcf injection, while the median of a Reuters poll with the same range produced a 47 Bcf build. NGI projected a smaller 43 Bcf injection.

U.S. natural gas inventories increased to 3,420 Bcf for the week-ended August 21. Storage volumes stood at 580 Bcf, or 20.4%, more than the year-ago level of 2.840 Bcf; and 438 Bcf, or 15%, more than the five-year average of 2.982 Bcf.

Short-Term Weather Outlook

According to NatGasWeather for August 27 to September 2, “Hurricane Laura made landfall along the Texas/LA border overnight with heavy rain strong winds, and storm surge. Laura will track through the east-central and eastern US the next couple of days with heavy rain and highs of only mid-80s. The rest of the US besides portions of the far northern US will be very warm to hot the next few days with highs of upper 80s to 100s, hottest in the Southwest.

Demand will ease to moderate this weekend through early next week as weather systems sweep across the northern and central US with highs of only upper 60s to 80s.

Daily Forecast

A bullish tone is being fueled by a drop in output to its lowest level since May due to shutdowns of offshore facilities. Prices are firming despite a drop in liquefied natural gas (LNG) exports to their lowest since February 2019. The price action suggests investors are focusing more on the lost production than on the demand destruction caused by the hurricane.

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