Natural Gas Price Fundamental Daily Forecast – Weakening Demand for LNG Weighing on Prices

Natural gas futures are edging lower on Wednesday as milder temperatures and rising production continue to offset lightening demand for liquefied natural gas (LNG). Meanwhile, there is growing nervousness over Thursday’s U.S. Energy Information Administration weekly storage report after last week’s report grossly missed the forecasts.

At 14:15 GMT, May natural gas futures are trading $2.672, down $0.024 or -0.89%.

NatGasWeather said the combination of “a bearish trend” on the LNG front with forecasts for warmth and minimized heating needs hampered markets.

“In addition to above average temperatures this week, “the overnight weather data held milder trends for early next week over the eastern half of the U.S.,” the firm said.

LNG Volume Levels Topping Out

According to Natural Gas Intelligence (NGI), LNG feed gas volumes topped 11 Bcf at the close of trading last week, NGI data showed, hovering near record levels and representing what market participants thought was a full recovery from the disruptions caused by the Texas freeze in mid-February. However, over the weekend and into Monday and Tuesday, LNG levels dipped below 11 Bcf, and on Wednesday, they declined to 9.83 Bcf during the trading session.

Short-Term Weather Forecast

According to NatGasWeather for March 9 to March 15, “Most of the U.S. will be mild to warm this week with highs of 50s and 60s across the northern U.S. and 60s to lower 80s across the southern U.S. Cooler exceptions will be over New England today and across the West mid-week as weather systems bring showers. Cold air arriving into the Rockies and Plains Friday will spread across the Great Lakes and Northeast this weekend with lows of 10s to 30s. A milder break with highs of 50s to 70s will set up over the eastern half of the U.S. next week ahead of another cold shot pushing into the interior West.”

US Energy Information Administration Weekly Storage Report

Last week the EIA reported a 98 Bcf withdrawal from U.S. gas stocks for the week-ended February 26. Analysts were looking for a triple digit pull, so the report was deemed disappointing.

Working gas in storage was 1,845 Bcf as of Friday, February 26, 2021, according to EIA estimates. This represents a net decrease of 98 Bcf from the previous week. Stocks were 277 Bcf less than last year at this time and 178 Bcf below the five-year average of 2.023 Bcf. At 1,845 Bcf, total working gas is within the five-year historical range.

Looking ahead to this week’s EIA report, Energy Aspects issued a preliminary estimate for a 61 Bcf withdrawal for the week ended March 5.

Daily Forecast

The main trend is down according to the daily swing chart. The next two swing bottom targets come in at $2.615 and $2.527. The main trend will change to up on a move through $2.916.

The main range is $2.352 to $3.060. The market is currently testing its 50% to 61.8% retracement zone at $2.706 to $2.622. This zone is controlling the near-term direction of the May natural gas futures contract.

Holding between $2.706 and 2.622 will indicate trader indecision and possibly an early sign that momentum is getting ready to shift to the upside.

Look for a bullish tone to develop on a sustained move over $2.706, and a bearish tone on a sustained move under $2.622.

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