Natural Gas Price Fundamental Daily Forecast – Waning LNG Feed Gas Demand Capping Prices Early

Natural gas futures are trading flat on Tuesday shortly before the regular session opening, but still holding above last week’s multi-month low. The price action actually represents a mixed reaction to Tropical Depression Cristobal, which made landfall early Monday, shutting down some production facilities, but also bringing cooler temperatures to part of the South.

At 11:43 GMT, July natural gas is trading $1.790, up $0.001 or +0.06%.

Monday afternoon, the Interior Department’s Bureau of Safety and Environmental Enforcement said about 35% of natural gas and 34% of oil output produced in the Gulf of Mexico remained shut-in after Cristobal’s landfall in Louisiana, hindering near-term production levels. However, by evening the threat of damage was dampened as the Tropical Storm move out of the area.

Some researchers weren’t worried anyway and the price action reflected this. They concluded that the shut-ins likely would create only modest production declines given that Cristobal weakened to a tropical depression once it came ashore. In natural gas trader speak, this means it was a non-event.

“Data shows a small decline in production”, likely from Cristobal impacts over the weekend, “but LNG has moved back lower as well, down under 4.0 Bcf once again,” Bespoke said in a note Monday. “This is the data point that has the market concerned, as traders want to see evidence that we can maintain the tightening of supply/demand balances with LNG at much lower levels.”

Short-Term Weather Outlook

According to NatGasWeather for June 9 to June 15, “Texas and the Southwest remain hot with highs of 90s and 100s for regionally strong demand, while very warm from the Great Lakes to the Southeast with 80s to lower 90s. A weather system will track out of the West and across the Midwest/Plains the next few days with comfortable highs of 60s and 70s. An additional weather system will track into the East this weekend with showers and highs of upper 60s to 80s. Overall, moderate national demand through Wednesday then easing to light Thursday to Monday as the East cools below normal.”

Daily Forecast

Prices could sit in a range for a few days “as traders want to see evidence that we can maintain the tightening of supply/demand balances with LNG at much lower levels,” according to Bespoke.

“We see natural gas pricing skewed to the downside in the near term, as LNG feeds gas losses and production increases are expected to weigh on the commodity,” Tudor, Pickering, Holt & Co. (TPH) analysts said.

Looking ahead to Thursday’s government weekly storage report, we could see an end to triple digit builds due to the excessive heat in the Northern U.S.

Capping gains, however, are worries over a second wave of Coronavirus outbreaks and a slower recovery of the economy.