Natural Gas Price Fundamental Daily Forecast – Warmer Shift in Weather Reduces Speculative Demand

Natural gas futures are inching higher early Tuesday after tumbling the previous session. The price action suggests the magnitude of the move may have caught speculative buyers, betting on cold weather, by surprise. According to Natural Gas Intelligence, “A new production high, weak Henry Hub cash and a warmer shift in weather outlooks swept the rug out from under natural gas futures on Monday.”

At 07:23 GMT, December natural gas futures are trading $2.456, up 0.015 or +0.61%.

New Production High

On Monday, NatGasWeather reported that natural gas production hit an all-time high of 95 Bcf/d over the weekend. Bespoke Weather Services confirmed this figure.

Genscape Inc. put production at a slightly lower figure, albeit one that still sets a fresh high. The firm estimates that production crested the 93 Bcf/d mark for the first time on Friday, when it reached 93.58 Bcf/d. Weekend production was estimated to have averaged 93.37 Bcf/d.

“Production the past three days have been averaging nearly 1.58 Bcf/d greater than the month-to-date average,” Genscape senior natural gas analyst Rick Margolin said. “Virtually every producing area in our estimate is up except the San Juan and West.”

Weak Henry Hub Cash Markets

Cash prices were lower at benchmark Henry Hub and across of Texas as mostly mild weather was on tap for another day before a cold front sweeps through the country on Wednesday.

Warmer Shift in Weather Outlooks

Weather models trended warmer shedding demand from their outlooks. There is still some cold in the forecast, but it’s not as strong and is focused more in the central/western states as opposed to the more important population centers in the eastern United States, according to Bespoke Weather Services.

Short-Term Weather Outlook

“The upcoming week sees below-normal demand thanks to eastern warmth, with demand climbing to normal this weekend into early next week, then finally reaching above normal levels in the middle of next week, if current forecasts hold,” Bespoke chief meteorologist Brian Lovern said.

Natural Gas Intelligence reported that Bespoke is watching the tropical forcing patterns, which suggest that milder weather could return in the wake of whatever cold there is during the first week of November, “assuming blocking is not strong enough to outduel the signal.”

Daily Forecast

The “not too warm, not too cold” forecast could help hold prices in a range over the near-term. However, prices could continue to plunge if production keeps rising.

The short-term range is $2.568 to $2.388. Its 50% level or pivot at $2.478 is controlling the near-term direction of the market. Holding below this pivot will help sustain the downside bias. Recapturing this level will mean there are still speculative buyers out there.