Natural Gas Price Fundamental Daily Forecast – Weak LNG Exports Remain a Major Concern

Natural gas prices plunged earlier in the session because traders are having a difficult time finding anything bullish on both the supply and demand side of the equation. Despite the early weakness that drove the market to $1.674, someone must have found the price level attractive because the market has clawed back more than half of its earlier losses. Nonetheless, there is going to have to be a major shift in the fundamentals to turn the main trend to up.

At 10:47 GMT, July natural gas futures are trading $1.731, down $0.036 or -2.04%.

Natural Gas Intelligence (NGI) blames the weak price action on “demand concerns tied to mixed weather forecasts and diminished natural gas exports.”

NGI also reported that “Intense summer heat across swaths of Texas and the Southwest, along with forecasts for higher temperatures elsewhere later in June, have fueled optimism for increased gas demand to run air conditioners. However, projections for weaker weather systems next week and strong rains over much of the country, along with cooler temperatures in the East, chilled enthusiasm some on Tuesday.”

Weak Liquefied Natural Gas Demand

Weak LNG exports remain a major concern. Levels of gas flowing to export plants are depressed relative to pre-coronavirus pandemic conditions, a result of low prices in Europe and Asia, with a notable demand drop from Japan, the world’s largest importer, NGI reported.

“LNG volumes remain anemic,” Bespoke Weather Services said Tuesday. “Power burns continue to show recovery,” but Tuesday “is the hottest day we see in the forecast until late next week, so we expect some drop-off in absolute terms.”

LNG Situation Could Worsen

EBW Analytics Group said, “There are signs” that “LNG produced elsewhere could start to flow into the United States as a destination of last resort.” The firm noted that a shipment from Trinidad was unloaded at the Dominion Cove Point terminal in Maryland this week.

“This marks the first time since the pandemic began that a cargo that previously was expected to be sold into the global market has wound up on U.S. shores. Other cargoes from Trinidad are likely to follow.”

Daily Forecast

Other than unpredictable short-covering rallies, there aren’t any visible reasons to buy natural gas unless you’re a born bottom-picker, hoping to catch lightning in a bottle. Even if there is a meaningful short-covering rally, it will likely be sold. Weather is likely to be behind any strong short-covering since coronavirus demand issues are expected to linger.

Looking ahead to Thursday’s EIA storage report, Energy Aspects predicts a 90 Bcf injection. This is related to the hot temperatures in the Northern states last week.

For a look at all of today’s economic events, check out our economic calendar.