Natural Gas Price Fundamental Daily Forecast – Weaker as Traders Digest Impact of Hurricane Barry

Natural gas futures are trading lower shortly after the regular session opening, which means traders are responding to the expected drop in demand due to the impact of Hurricane Barry. After finding support later in the week, the market could rebound as the weather forecasts indicate the return of heat ahead of the week-end.

At 12:26 GMT, September natural gas futures are trading $2.392, down $0.042 or -1.73%.

Production Concerns

According to the Bureau of Safety and Environmental Enforcement, based on data from offshore operator reports submitted Friday, nearly 49% of natural gas production, or 1.35 Bcf/d has been shut in.

The report also showed a total 257 offshore production platforms, or 38% of the 669 manned platforms, had been evacuated. Staff also had been evacuated from 10 rigs non-dynamically positioned (DP) rigs, equal to 48% of the 21 in operation. Eleven DP rigs had moved off location as a precaution, representing 55% of the 20 DP rigs working offshore.

Genscape Inc. estimates showed production dropping to a 53-day low at 87.02 Bcf/d early Friday, driven by cuts to Gulf Coast output.

“We estimate total Gulf Coast production has dropped by about 2.14 Bcf/d from the prior 30-day average,” Genscape analyst Allison Hurley said. “At about 9.3 Bcf/d of current production, volumes for the region are at their lowest levels since January 2018. Gulf of Mexico output has dropped to just 0.5 Bcf/d, a decline of 1.97 Bcf/d from the pre-storm average. South Louisiana output is also down to 0.5 Bcf/d, a loss of about 0.18 Bcf/d from pre-storm averages.”

Hotter Temperatures on the Way

Bespoke Weather Services said, after the cooler temperatures caused by Hurricane Barry pass, the weather outlook remained “hot dominated”.

“Once the remains of the storm are gone, we reach peak heat in the pattern” late in the upcoming week, “with very hot conditions in most of the eastern half of the nation.” Bespoke added, “As we move toward the final week of July, we see the risk that the heat relaxes enough to take overall demand back toward normal levels, though for July as a whole, we still see this month ranking as one of the top five hottest Julys on record” in terms of national gas-weighted degree days.

Early Look at EIA Report

Preliminary estimates for the week-ending July 12 to show a build of 70 Bcf versus the five-year average.

Daily Forecast

The daily chart pattern suggests weakness throughout the session as long as September natural gas remains under a technical 50% level at $2.428. If this creates enough downside momentum then we could see an eventual break into the short-term 50% level at $2.296. This is a value area so I suspect buyers to return on a pullback into this level.