Natural Gas Price Fundamental Daily Forecast – Weather Concerns May Be Weighing on Prices

Natural gas futures are down sharply on Monday which can be an indication of several factors. Liquefied natural gas (LNG) demand may hit over the weekend. Production may have been bumped higher following the passing of hurricane Zeta. Prices may be too high for this time of the year, or the weather forecasts may have shifted toward warmer.

At 13:00 GMT, December natural gas futures are trading $3.269, down 0.085 or -2.53%.

Short-Term Weather Outlook

According to NatGasWeather for November 2 to November 8, “A chilly weather system will exit the Great Lakes and Northeast Monday, leaving lows of 20s and 30s in its wake. After a cool start across much of the rest of the U.S. Monday with lows of 20s to 40s, rapid warming will follow in the afternoon and in the days ahead with highs of 50s and 50s arriving over the northern U.S. and very nice 70s and 80s over the southern U.S., locally hotter 90s Southwest.”

“Colder air will push into the West and Plains next weekend with lows of 10s to 30 but still nice over the southern and eastern U.S. with 60s to 80s for light demand. Overall, national demand will be high on Monday, then low the rest of the week.”

US Energy Information Administration Weekly Inventories Report

The EIA reported Thursday that domestic supplies of natural gas rose by 29 billion cubic feet (Bcf) for the week-ended October 23. On average, supplies were expected to climb by 37 Bcf for the week, according to analysts polled by S&P Global Platts.

Total stocks now stand at 3.955 trillion cubic feet (Tcf), up 285 Bcf from a year ago, and 289 Bcf above the five-year average, the government said.

Daily Forecast

Although there are a number of reasons for today’s early weakness, the most logical in my opinion is a change in the 11 to 15 day forecast over the week-end. The market had already priced in milder temperatures moving into key demand areas on Tuesday, but the bulls were holding onto hope that another wave of cold temps would hit about mid-month. That forecast may have changed over the weekend.

Despite the setback, we remain bullish and are looking for much higher prices this winter. Rising LNG exports and lower production should be enough to underpin prices, but we’re still going to need heating demand to trigger breakouts to the upside this season.

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