Natural Gas Price Fundamental Daily Forecast – Underpinned by Expectations of Supply Deficit at Start of Winter Heating Season

Natural gas futures are trading slightly better shortly before the regular session opening on Monday. The price action is being driven primarily by reports of cooler temperatures at the beginning of October. This could lead to increased demand. Longer-term, the market should be underpinned by expectations of a supply deficit at the start of the winter heating season. So if the market runs into resistance near the psychological $3.000 level, any weakness is likely to attract buyers.

At 1200 GMT, November Natural Gas is trading $2.962, down $0.012 or -0.40%.

Recapping last week’s U.S. Energy Information Administration storage report, stocks are 672, or 20%, less than the year-ago level or 3.394 Tcf and 586 Bcf, or 18%, less than the five-year average of 3.308 Tcf. At 2.722 Tcf, total working gas is below the five-year historical range and sits 196 Bcf lower than the five-year minimum.

Short-Term Weather

According to NatGasWeather.com for the September 24 to 30 period, “High pressure will dominate the southern U.S. with highs of 80s and 90s. A rather warm weather system with heavy showers will sweep through the east-central U.S. Monday and then into the Northeast Tuesday. The northern U.S. will be mostly comfortable with upper 60s to lower 80s besides cooler over the Northern Plains with highs of 50s. Stronger cool fronts will push into the northern & central U.S. Wednesday-Sunday. Overall, demand will be moderate, locally high.”

Forecast

Production is likely to remain steady so most of the price action will likely be influenced by the weather forecasts and demand. Most speculators are looking at the 10-14 day forecast. “Recent weather data has been milder/warmer October 4-8 as high pressure returns across much of the country with national demand easing back to light levels.”

Traders will be focusing on this weather pattern because if it changes to cooler temperatures then prices could spike through $3.000. If it comes in milder to warmer then prices could retreat to $2.864 to $2.836.

Looking ahead to Thursday’s storage report, traders are looking for a 63.4 Bcf injection for the week-ending September 21, which would come in below the five-year average 81 Bcf build and close to the 64 Bcf build recorded a year ago.