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Natural Gas Price Fundamental Daily Forecast – Weakens as Lower Cooling Demand Forecast Offsets Output Drop

By:
James Hyerczyk
Updated: Aug 15, 2022, 01:07 UTC

Weather patterns for the 8-15 Day Forecast are expected to be near to cooler than normal over much of the U.S. besides the West.

Natural Gas

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Natural gas futures retreated on Friday amid new forecasts calling for cooler weather and lower cooling demand next week than previously expected. The news offset bullish concerns from throughout the week about falling output.

Despite Friday’s setback, natural gas futures still finished higher for the week due to four straight days of lower output and earlier forecasts calling for hotter weather in late August.

On Friday, October natural gas futures settled at $8.744, down $0.119 or -1.34%. The United States Natural Gas Fund ETF (UNG) finished at $30.26, up $0.15 or +0.50%.

Also pressuring prices was the continuing outage at the Freeport liquefied natural gas (LNG) export plant in Texas, which has left more gas in the United States for utilities to inject into stockpiles for next winter. Freeport expects the plant to return to at least partial service in early October.

In other news, Shell PLC announced the three U.S. Gulf of Mexico deepwater platforms shut down on Thursday, due to a leak in two pipes connecting the platforms, have been reopened. This should add about 0.3 bcfd to gas supply.

Refintiv Supply/Demand Outlook

Data provider Refinitiv said average gas output in the U.S. Lower 48 states had risen to 97.6 bcfd so far in August from a record 96.7 bcfd in July. On a daily basis, however, output has declined every day since hitting a record 98.3 bcfd on Monday, sliding to a preliminary 95.6 bcfd on Friday.

Refinitiv also projected average U.S. gas demand, including exports, would fall from 101.9 bcfd this week to 96.9 bcfd next week as the weather turns cooler before rising to 98.1 bcfd in two weeks as some heat returns.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) released its weekly storage report on Thursday. It showed a build of 44 Bcf for the week-ending August 5. This was higher than the consensus estimate of 40. Nonetheless, once traders fully-assessed the data, the injection appeared to confirm storage levels are still on course to fall short of the 3.7 trillion cubic feet that is considered to be adequate supply ahead of winter.

The EIA recorded a 44 Bcf injection into storage during the similar week last year, while the five-year average is a 45 Bcf build.

Cooler Forecast

The market could feel some pressure early next week due to a change in the weather forecasts. According to NatGasWeather, “Weather patterns for the 8-15 Day Forecast are expected to be near to cooler than normal over much of the U.S. besides the West. This will bring larger builds, potentially larger than normal and has led to a neutral to even slightly bearish forecast. However, nat gas prices are using other reasons for sharp gains besides upcoming weather patterns.

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

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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