Natural Gas Price Fundamental Daily Forecast – Upcoming “Mega-Injections” Could Be Extremely Bearish

Natural gas prices are trading slightly higher on Wednesday after posting an inside move and lower close the previous session. The price action suggests investor indecision and impending volatility. Traders are trying to balance short-term cold shots with forecasts for warmer mid-term temperatures. However, some speculators are betting on more cold weather later this month. The conflicting weather reports are limiting both upside and downside momentum.

At 04:27 GMT, May natural gas is trading $2.687, up $0.003 or +0.11%.

Short-Term Weather Outlook

According to NatGasWeather for April 2 to April 8, “After a cool start today across the northern and eastern US with lows of 20s and 30s, including 30s into Texas and the South, conditions will warm as high pressure strengthens. This will result in highs of 50s and 60s across the northern US the next few days, with increasing 70s late in the week and this weekend, including Chicago to near NYC. The central and southern US will be warm with highs of 70s and 80s. Areas of showers can be found across the West and along the Mid-Atlantic Coast as weather systems track through. Overall, national demand will swing from high early in the week to low by late in the week, averaging out to moderate.”

Mid-Term Weather Outlook

NatGasWeather is also saying “The overnight weather data was mixed with the US model trending further colder April 10-14. Overall, the coming pattern is quite bearish late this week through early next week, then neutral April 11-15^th. Although, the April 11^th-15^th period had been considered bearish prior to recent cooler trends. What stands out most is the very warm/bearish demand this weekend through early next week and then a little stronger demand as cooling arrives over the central and northern US April 11-14, which had been warmer in previous days and has trended towards neutral.”

Daily Forecast

While most traders may be watching the weather, I think it’s more important to watch production with the injection season starting with this Thursday’s EIA report. EBW CEO Andy Weissman said, “At current strip prices and if current weather forecasts validate, starting with the April 11 storage week, injections could average more than 100 Bcf/week over a 13-week period, potentially adding as much as 1.4 Tcf to storage versus 900 Bcf over the same period last year.”

This is potentially bearish news because “this string of mega-injections could create a huge year/year storage surplus and slash the deficit versus the five year average to near zero, pushing end-of-season inventories far above acceptable levels and moving the forward curve down by 20-25 cents,” according to EBW.