Natural Gas Price Fundamental Daily Forecast – US Fuel Supplies Unusally High for this Time of Year

Natural gas futures are trading lower shortly after the regular session opening on Friday, but well-off its intraday low. The selling pressure is being driven by expectations of record output and forecasts calling for milder weather through late December.

At 13:43 GMT, March natural gas futures are trading $3.583, down $0.035 or -0.97%.

In other news, data provider Refinitiv said output in the U.S. Lower 48 states has averaged 96.8 billion cubic feet per day (bcfd) so far in December, which would top the monthly record of 96.5 bcfd in November.

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic supplies of natural gas fell by 88 billion cubic feet (Bcf) for the week-ended December 10. That compared with the average decline of 88 Bcf forecast by analysts polled by S&P Global Platts.

Ahead of the EIA report, analysts were pointing to a withdrawal in the high 80s to low 90s Bcf, with a consensus of 86 Bcf, which would compare with last year’s 118 Bcf draw. The five-year average pull is 114 Bcf.

Natural Gas Intelligence reported that a Bloomberg survey produced a range of withdrawal estimates from 77 Bcf to 91 Bcf, with a median of 85 Bcf. Reuters polled 16 analysts, whose estimates ranged from withdrawals of 63 Bcf to 99 Bcf, with a median withdrawal of 88 Bcf, and NGI modeled an 89 Bcf pull for the report, which covers net changes to inventories during the week ended December 10.

Total stocks now stand at 3.417 trillion cubic feet (Tcf), down 326 Bcf from a year ago and 64 Bcf below the five-year average, the government said.

Short-Term Weather Outlook

According to NatGasWeather for December 17-23, “National demand will increase this weekend into the start of next week as a weather system over the Midwest taps cold Canadian air and tracks it across the Northeast with highs of 10s to 40s.

Demand would be stronger if not for comfortable conditions across much of the southern half of the U.S. with highs of 50s to 70s.

The West remains unsettled as Pacific weather systems track through with rain, snow and cool highs of 20s to 50s.

Overall, national demand will be low into Saturday, then moderate this weekend into the start of next week.”

Daily Outlook

The main trend is down. It was reaffirmed earlier in the session when sellers took out $3.503. It is now in a position to challenge the July 7 main bottom at $3.430. Taking out this level could trigger an acceleration into $3.186.

The fundamentals are bearish so we expect the trend to remain in motion until the selling is exhausted or prices hit a value area too good to pass up. A surprise change in the midday forecast to cold for December 26 to January 1 could reverse the market higher.

The longer-term outlook remains bearish with traders predicting that low heating demand has left so much gas in storage that there will soon be more of the fuel in stockpiles than is usual for the time of year for the first time since April.

Additionally, the premium of March 2021 futures over April 2021 slid to a record low of around 5 cents per mmBtu. That puts the March-April spread, known as the ‘widow maker’, close to going into contango with summer contracts (April) trading over winter contracts (March) even before the official start of winter with the solstice on December 21, according to Reuters.