Natural Gas Price Fundamental Daily Forecast – US Drillers Expected to Slash Oil & Gas Rigs to Lowest Ever

Natural gas futures are down sharply at the mid-session on Friday as traders continue to assess the latest government storage numbers and the impact of the gradual re-opening of the U.S. economy on demand.

At 16:29 GMT, June natural gas futures are trading $1.851, down $0.043 or -2.27%.

US Energy Information Administration Weekly Storage Report

The EIA on Thursday reported a 109 Bcf storage injection for the week-ending May 1, on the upper end of the estimates. This compares with the 96 Bcf increase in storage recorded by the EIA in the same week last year and the five-year average build of 74 Bcf for that week.

Prior to the release of the report, a Bloomberg survey showed injection estimates ranging from 101 Bcf to 114 Bcf, with a median of 111 Bcf. A Reuters poll of 17 analysts had a wider range that included a low of 95 Bcf and produced a median injection of 106 Bcf. A Wall Street Journal poll’s results also averaged 106 Bcf, while Natural Gas Intelligence (NGI) projected a 109 Bcf build.

Total stocks now stand at 2.319 trillion cubic feet, up 796 billion cubic feet from a year ago, and 395 billion cubic feet above the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for the week-ending May 8 to May 14, “Weather systems with showers and cooling will sweep across the northern U.S. through mid-next week with lows 20s to 40s, highs 40s to 60s. Near ideal temperatures with highs of 70s to 80s will rule Texas, the South and the Southeast. The Southwest will be hot with 90-100s, while mild to warm over the rest of the West with 60s to 80s. Overall, moderate heating demand North but light cooling demand in Texas, the South, and the Southeast.

Daily Forecast

The number of oil and gas rigs operating in the United States is expected to hit an all-time low this week – reflecting data going back 80 years – as the energy industry slashes output and spending to deal with the coronavirus-led crash in fuel demand, as reported by Reuters. The data from Baker Hughes will be reported at 17:00 GMT.

Today’s steep sell-off and yesterday’s EIA weekly storage report suggests that demand destruction from COVID-19 was proving stronger than recent production losses from declines in oil and gas rigs.

There were no major changes in the weather patterns overnight. The price action suggests we’re going to need some serious heat in order to increase demand.

Ultimately, the market is expected to remain bearish until demand starts to edge up and production starts to drastically turn lower.