Natural Gas Price Fundamental Daily Forecast – Weather Remains Main Factor to Watch Ahead of EIA Report

Natural gas futures are edging lower early Thursday shortly before the release of the U.S. government’s weekly storage report later in the session. Ahead of the report, traders are looking for a build of a little less than triple digits. Last week, the report surprised to the downside, revealing a lower-than-expected 81 Bcf injection into stocks for the week ending October 8.

At 09:06 GMT, December natural gas futures are trading $5.400, down $0.047 or -0.86%.

Report Results Could Be Downplayed Because of Weather Concerns

Analysts at Bespoke Weather Services, predict a build of 90 Bcf, but also warned about potential downside risks to the figure. They believe that even a slightly lower injection would prevent it from being looser week/week.

“The main factor to watch, moving forward, will be the weather,” the forecaster said. “Our ideas would bring more pressure to prices, favoring a November warmer skew, for now.”

EBW Analytics Group agreed that a potential weather shift remains the “critical wildcard” for the Lower 48.

“The 16- to 30-day forecast shows heating demand nearly even with 30-year normal and 65 gas-heating degree days above year-ago levels,” EBW said. “If it verifies, the forecast would likely arrest declines and could reinflate Nymex risk premiums by early to mid-November.”

US Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) is reporting that analysts responding to major surveys projected a build near 90 Bcf for the week-ending October 15. Reuters polled 17 analysts, whose estimates ranged from builds of 80 Bcf to 97 Bcf, with a median injection of 90 Bcf. The average of 14 estimates in a Wall Street Journal poll also landed at a 90 Bcf injection. The median of a Bloomberg survey, in which projections ranged from 84 Bcf to 95 Bcf, was 91 Bcf. NGI modeled a 95 Bcf increase in inventories.

Daily Forecast

Traders may react to today’s storage number immediately after the report, but the focus is likely to shift quickly to the weather, especially with November right around the corner. So don’t read into the report too much.

“Currently, market positioning suggests the need for at least modest cold, or recent declines may extend to the low-to-mid $4.00/MMBtu range,” EBW analysts said. “Any significant cold shot before Thanksgiving, however, could return prices toward recent highs north of $6.00/MMBtu.”

Technically, the major support zone is $5.269 to $4.956. This area stopped the selling at $5.070 on Tuesday. If it fails to hold, prices could collapse with $3.944 a potential downside target. This would likely occur if the new forecasts for November come in warmer than normal.

On the upside, buyers would have to overtake two resistance zones at $5.591 to $5.713 and $5.832 to $6.011 before the market can make another run at its recent top at $6.593.

We could be in the “sell the rally” mode until the weather turns colder.